PRIVATE BUSINESS

Whitehaven Harbour Bill  [Lords]

Considered; to be read the Third time.

Oral Answers to Questions

HEALTH

The Secretary of State was asked—

Smoking Ban

Jim Devine: What progress has been made on preparations for the implementation of the ban on smoking in enclosed public places.

Lyn Brown: What preparations her Department is making for the implementation of the ban on smoking in enclosed public places in England.

Patricia Hewitt: Since the Health Act received Royal Assent last year, my hon. Friend the Minister with responsibility for public health and officials have worked tirelessly, with local authorities, businesses and others, to prepare for implementation. As a result, I believe that going smoke-free in England next Sunday will be just as successful as it has already been in the rest of the United Kingdom.

Jim Devine: I thank my right hon. Friend for that answer. I am sure that history will be kind not only to her but to her Front-Bench colleagues, and, dare I say it, to her Parliamentary Private Secretaries and formers PPSs, for this bold and imaginative move. Lives will be saved, lung function among staff will be improved, and it will be possible to enjoy lovely meals in a restaurant or pub. Does she agree that the initiative will be as successful in England as it has been in Scotland, Ireland and Wales?

Patricia Hewitt: I strongly agree with my hon. Friend. I pay particular tribute to my hon. Friend the Minister with responsibility for public health and to my hon. Friend for their contribution. Researchers in Scotland have already found that going smoke-free has had an immediate and positive impact on the health of bar workers. We will see similar effects in England, and over time thousands of people's lives will be saved, reinforcing the fact that smoke-free legislation will be the biggest step forward for public health in our generation.

Lyn Brown: Does the Secretary of State agree that Newham council and primary care trust should be congratulated on their work in preparation for this legislation? They have engaged with over 250 businesses and have so far encouraged 2,000 people to quit, in the "Big Quit" campaign.

Patricia Hewitt: I readily congratulate Newham borough council on the excellent work that it and local authorities up and down the country have done to prepare for the smoking ban. As a result, not only does almost every business know that it needs to make preparations for going smoke-free on Sunday, but almost every member of the public is aware of the change to come. I am delighted that thousands of people have already taken advantage of the excellent stop smoking services provided by the NHS. Thanks to the efforts of the NHS, local councils and many others, we will go on reducing the single biggest cause of illness and premature death in our country.

Richard Taylor: I am sure that the Secretary of State is aware of recent reports from Italy that the occurrence of heart attacks has dropped significantly since its ban on smoking in public places. Does she agree that that would be an excellent way of publicising the benefits of the ban in this country?

Patricia Hewitt: The hon. Gentleman makes an extremely important point. One of the compelling pieces of evidence from the chief medical officer was that even second-hand smoke, over quite a short space of time, can have a disastrous effect on people's heart health. Conversely, going smoke-free will save thousands of people's lives and save thousands of families from the grief of the premature death of a beloved family member.

Patrick Cormack: Has the absurd and misguided proposition that no smoking signs be erected outside churches and cathedrals been withdrawn?

Patricia Hewitt: I have to say that the whole issue of signage was fully debated in Committee, both in the House and another place, before the Health Bill received Royal Assent last year. None of the hon. Gentleman's Conservative party colleagues raised any complaint or proposed any amendment at the time. The signage regulations introduced in England are less onerous than those in Scotland, which have not given rise to any problems. In Southwark cathedral, for instance, there are already public signs saying, "No mobile phones", "No drinking", and even, I am told, "We accept Visa".

Kevin Barron: The World Health Organisation framework convention on tobacco control meets in Bangkok next week to agree best practice guidelines for protection from second-hand smoke. Given that all parts of the UK will have legal protection from second-hand smoke from Sunday, will the Government be supporting the guidelines next week?

Patricia Hewitt: I thank my right hon. Friend for that question. I also thank him for, and congratulate him on, the superb work that he and his Select Committee did in securing such a large cross-party majority for going smoke-free. I am happy to assure him that we not only endorse the draft guidelines for the WHO framework convention, but have played an active role in developing them. We will support the adoption of the guidelines as they stand at the conference of the convention parties which is being held next month.

Andrew Murrison: On 1 July, prison cells will be one of the very few enclosed public places where people can smoke, yet the health of the prison population is appalling and half of those who enter prison as non-smokers leave as smokers. When the Secretary of State has gone, she will best be remembered for her spectacular U-turn on smoke-free pubs. In the very short time remaining to her, will she assess the health consequences for convicts and prison officers of the exceptional smoking rights that she has granted to prisoners?

Patricia Hewitt: I am sorry that at a time when, thanks to a stunningly large majority in the House, to which the hon. Gentleman contributed, England is about to go smoke-free, he takes the tone that he does. We have taken the view, and Parliament took the view, that given that prison is akin to an individual's own home, it was right to take the approach that we did, but it is also right, and absolutely essential, that we go on working with the prison authorities to reduce smoking in prison and to help more prisoners to give up smoking. I very much hope that the hon. Gentleman and his colleagues in the Conservative party will take the view, which I am sure all my hon. Friends do, that those who are Members of this House or who seek to be Members of this House should support and respect the laws that are made in this place. Otherwise, they might find themselves in prison.

Julie Morgan: Is my right hon. Friend aware that since the introduction of the smoking ban in Wales on 2 April, there has been a huge increase in the number of smokers who want to give up and, I think, a 30 per cent. rise in the number of calls to the helpline? Does she agree that it is very important that extra resources are made available to respond to the needs of people who want to give up smoking?

Patricia Hewitt: My hon. Friend is absolutely right. I am glad to say that the NHS in England is already seeing an increase in the number of people who are coming forward and asking for support from stop smoking services. With more than £8 billion of additional funding going into the NHS this year, I have no doubt at all that primary care trusts all over the country will be ensuring that stop smoking services, nicotine replacement therapy on prescription and so on will all be available to support the growing number of people who want to give up smoking.

Respite Care

Kitty Ussher: What guidance her Department has issued on the introduction of emergency respite care for carers.

Martin Salter: What guidance her Department has issued on the introduction of emergency respite care for carers.

Ivan Lewis: Next month we plan to issue guidance on the introduction of emergency short breaks to councils, and £25 million will be made available to support implementation of the guidance from October of this year.

Kitty Ussher: I am grateful to the Minister for that response. Some of the most impressive people that I have met in my constituency are the young people, sometimes still at school or in other full-time education, who for whatever reason are also the sole carers for parents, grandparents or other family members. Obviously, times are tough for them on a number of occasions, particularly when they try to balance their aspirations with their caring responsibilities. What are the Government doing to ensure that, when times are tough, emergency respite care is available for those young carers?

Ivan Lewis: I entirely agree with my hon. Friend. There is no doubt that young carers do a tremendous job and in many ways are the hidden heroes. On the other hand, their caring responsibilities often undermine their education and have a negative impact on their life chances. Therefore, we have a duty—a responsibility—to give the needs of young carers a much greater priority than we have in the past. They will be able to access the new emergency respite care funding that we are announcing, which will be available from October. They will be central to the consultation that we are undertaking on a new national strategy for carers. We want to hear the voice and the real-life experiences of young carers as we develop a new deal for carers in every part of this country.

Martin Salter: The Minister will be aware that the recent national carers week had as its objective widening access to support services for carers. Will the recently announced review of the national carers strategy include an expansion of emergency respite care for carers who need it, and if not, why not?

Ivan Lewis: My hon. Friend raises an important point. It is essential that the review of the future new deal for carers takes account of every element that affects carers' responsibilities and life. Carers want a system that is on their side, in terms of the NHS and social care, but they also want a life of their own and access to employment, lifelong learning and leisure opportunities. Therefore it is essential that our new deal for carers expands emergency respite care, but also touches on every single aspect that affects a carer's caring responsibilities and their right to a life of their own.

Tim Farron: Help the Aged estimates that 500,000 people in this country are victims of elder abuse, many of whom live in care homes. Given that, does the Minister feel that the current inspection and regulation arrangements are adequate to ensure that we identify and eradicate elder abuse in our care homes?

Ivan Lewis: The hon. Gentleman raises an important issue. The demographics of our society are changing. People are living longer and longer, but in doing so they have more and more challenging conditions, such as Alzheimer's and dementia. As a consequence, we face new questions as a Government, as politicians and as a society. One of those questions is the abuse of older people. A shocking report last week talked of the abuse that takes place in people's homes, mainly—it has to be said—by relatives. However, there is also the issue of the abuse of older people in care establishments of one kind or another. Of course the existing regulatory system for the protection of vulnerable adults seeks to address that, but as people live longer we need new solutions to tackle one of the great challenges that our society now faces.

Mark Pritchard: Would the Minister like to join me in paying tribute to Leonard Cheshire, which provides excellent respite care facilities in Wellington in my constituency? Does he agree that that charity does an excellent job across the country?

Ivan Lewis: I thank the hon. Gentleman for a simple question. Leonard Cheshire does an entirely appropriate job. The bigger point is the relationship between statutory organisations and the voluntary sector, and their capacity to work together to improve dignity, respect and support for older people and their families. We need a new understanding that those responsibilities are shared, that some are the responsibility properly of Government and the state, and others of families and carers, but that the voluntary sector has a unique and important role to play in offering people innovative and responsive services.

Charlotte Atkins: Does my hon. Friend recognise the vital role of day care for the elderly in providing respite for carers? If so, will he ask Staffordshire county council to reconsider its over-hasty plans to close day care facilities for elderly people, because that would put an impossible burden on their carers?

Ivan Lewis: I am sure that my hon. Friend will accept that it is not for me to intervene directly in the decisions that are taken by local authorities where people are democratically elected to serve their local community —[ Interruption. ] I thought that the Conservatives believed in localism and local decision making. Let us be consistent about that position. Having said that, in a society in which the demographics are changing and people are living longer, we need the full range of provision—domiciliary care, respite care, day care and support for carers—to be available so that older people who, rightly, want to remain in their own homes with maximum dignity, respect and quality of life, can do so. Therefore, in every locality, that full range of services must be provided by the NHS, local government and the voluntary sector, working in a far more integrated way than they have done historically.

Stephen O'Brien: In response to our call, the £25 million for emergency respite care may go some way to mitigate the cuts in planned respite care. Given the enormous disparity in care provision across the country, how many people stand to lose £38 a week towards their long-term care by next year from the reductions, which have just been announced in today's national framework for continuing care, in the high-band registered nursing care contribution? How will the Minister justify that to the new Secretary of State?

Ivan Lewis: I have to say that that is complete nonsense. Today, we announced an ending of the postcode lottery for the funding of continuing care. That has been demanded by the Opposition, charities, relatives and residents' groups through the years. As a result of decisions by the ombudsman and rulings by the courts, we have today issued national guidance that will end the postcode lottery. That means that people in different parts of the country with the same needs will have access to the same level of NHS funding for their continuing care.
	With respect to nursing care, the existing three bands have been swept into one. More than 80 per cent. of people who were on the lower or middle band will benefit significantly as a consequence of the £101 a week. A significant proportion of the remaining 20 per cent. will fall into the continuing care category and be entitled to full funding for that care. The burden will not fall on the remaining individuals in that 20 per cent, but will be borne by the care homes, 80 per cent. of whose residents overall will benefit.

Barbara Keeley: My hon. Friend the Member for Burnley (Kitty Ussher) mentioned young carers. As a group, they are very difficult to reach, but we know that thousands of them care for 50 hours a week, which puts a great strain on them. Will my hon. Friend the Minister talk to colleagues in the Department for Education and Skills to see whether we can get schools to do more to identify young carers, so that more of them can have access to the help that he has talked about?

Ivan Lewis: I agree entirely with my hon. Friend. Raising educational standards and performance is, of course, related to teaching and learning, but also to good leadership. The content of the curriculum is also relevant, but so are the factors that impact on the lives of children and young people before they arrive at the school door every morning. The fact that young people have to fulfil the responsibilities of the young carer, or suffer bullying or antisocial behaviour inside or outside school, has a direct impact on our ability to raise standards and ensure that every child fulfils their potential. A core part of a school's responsibility should be to identify the problems of students and pupils. For me, young caring is a fundamental part of a school's responsibility in the modern world.

Mental Health

Graham Brady: What guidance she has issued on maximum waiting times for primary care psychological services.

Patricia Hewitt: Currently, there are no national waiting times targets for access to psychological therapies in primary care. Waiting times standards are being developed and will be tested in the 10 new pathfinder sites in 2007-08. They will include appropriate access times for the different stages of treatment set out in the National Institute for Health and Clinical Excellence guidelines.

Graham Brady: When I tabled a question asking the Secretary of State how long my constituents had to wait for these services, she did not know. However, the Bolton, Salford and Trafford mental health trust tells me that, whereas patients in Salford have to wait only eight weeks for a first appointment, my constituents in Timperley have to wait a staggering 22 months. Does she agree that that is entirely unacceptable, and will she advise her successor to deal with the problem as a matter of urgency?

Patricia Hewitt: The hon. Gentleman is quite right: waiting times for psychological therapies are too long in many places, including his constituency. However, I hope he welcomes the work being done by his local mental health trust to cut those waiting times, for example by reducing the levels of non-attendance. The trust is introducing new ways of working that are based on best practice elsewhere, and it expects to see improvements by September of this year. In addition, it would appear that the hon. Gentleman is asking for a new national target, even though the Opposition recently said that they intend to scrap all targets. I am grateful that he at least recognises—

Mr. Speaker: Order.

Lynne Jones: Does my right hon. Friend keep records of cases in which people are treated with medication compulsorily because access to psychological therapies is not available? Does she agree that, in the 21st century, such a practice is unacceptable?

Patricia Hewitt: My hon. Friend raises an important point. The NHS keeps detailed records on every patient who is subjected to compulsory treatment of whatever kind, but she is absolutely right to say that, as we give patients access to psychological therapies often at a much earlier stage in the development of mental health problems, it is likely—this would be of great benefit to those patients and their families—that we can avoid the need for more acute treatment, and particularly compulsory treatment, further down the line.

John Bercow: What estimate has the right hon. Lady made of the level of the shortfall in the number of trained and qualified psychologists?

Patricia Hewitt: It is already clear that we will need to continue to increase the number of clinical psychologists, psychiatrists and other mental health care professionals, as we have done over the past 10 years. We have already established demonstration sites in Newham and Doncaster, and the early results in Newham show that one in three patients are improving their employment prospects as a result of psychological therapies. That gives us real heart that continuing to build up the service—as we have promised to do and as we will do—will bring enormous benefits to patients, their families and the wider community.

Meg Hillier: In my constituency, we have a high incidence of mental health problems, and we have good organisations, including, among others, the Psychiatric Rehabilitation Association, which provides psychological services. What can my right hon. Friend say about improving access to those services, particularly out of hours, so that people's whole lives are not disrupted because they have to take time off work to go to quite difficult sessions? Perhaps more sessions could be provided in the evenings and at weekends.

Patricia Hewitt: My hon. Friend raises an extremely important point. One of the great advances that the NHS has made in recent years has been the establishment of more than 700 new community mental health teams, whose services are available to patients when they need them. I have talked to mental health staff who meet the users of their services in the community: in a local café or in their own homes. In particular, the crisis resolution team is available at all hours to meet the needs of the patient, rather than expecting the patient to go on suffering until the service is ready to meet their needs.

Tim Loughton: Why did the clinical director of the Leicestershire Partnership NHS Trust, in the Secretary of State's constituency, find it necessary earlier this month to write to the GPs in her constituency encouraging them to get their patients to stump up their own money for private treatment for cognitive behavioural therapy? The letter stated:
	"If you have any patients who would like to pursue private treatment for CBT we would be grateful if you could mention our service...We offer a fixed cost service at £110 per session".
	That is private treatment using NHS facilities and staff. The clinical director was subsequently forced to withdraw that letter in a hurry. What advice would the Secretary of State give her successor on how to reduce the alarming waiting times for talking therapies without sacrificing the guiding principle of the NHS—that treatment should be free at the point of delivery?

Patricia Hewitt: As the hon. Gentleman indicated, that letter was withdrawn almost as soon as it was issued. If he were more aware of the situation in Leicester and Leicestershire, he would know very well that there have been some significant difficulties in that trust in recent years. There is now a new chief executive in place, and I have no doubt at all that the trust will move rapidly to improve its services and will certainly not depart from the principle that is absolutely central to the national health service—at least as long as there is a Labour Government—that care will be provided on the basis of clinical need and not the ability to pay.

North Yorkshire Trust Deficit

Hugh Bayley: What assessment she has made of the impact the North Yorkshire and York primary care trust deficit is having on care for patients in York.

Ivan Lewis: Although the NHS overall delivered a net surplus of £510 million in 2006-07, we recognise that a number of organisations—North Yorkshire and York PCT among them—continue to face significant financial challenges. Despite financial difficulties, all parts of the NHS are consistently delivering for patients against national priorities.

Hugh Bayley: I am informed by the strategic health authority that the budget of the NHS trust in York will rise by £6 million, despite the deficit in North Yorkshire. York hospital will, however, be closing beds because a greater number of patients are being treated in the new £8 million day unit at the hospital. Will the Minister therefore reassure me and my constituents that the same full range of NHS treatments will be available to patients in York as are available elsewhere in the country?

Ivan Lewis: I congratulate my hon. Friend both on how he has championed the needs of patients in his constituency and the surrounding area and on his frankness about the need for financial discipline and budget control in the NHS—a responsible balance. Of course he is right to demand an appropriate balance of treatment, from social care and community health services to acute NHS provision, to ensure that patients in his constituency receive appropriate, high-quality and responsive health care. I give my hon. Friend that assurance today.

NHS Dentistry

Lorely Burt: What recent assessment she has made of the level of access to NHS dentistry.

Tom Brake: What recent assessment she has made of the level of access to NHS dentistry.

Rosie Winterton: Since April last year, primary care trusts have commissioned a growing volume of new dental services. Once those services are fully up and running, approximately 500,000 patients will gain access to NHS dentistry.

Lorely Burt: In the past 12 months, the number of adults seen by an NHS dentist has fallen by 63,000. The latest figures show that 45 per cent. of the population have not seen a dentist in the past 24 months—a figure that has remained stable over time. How can the Secretary of State claim that the new contract has increased access to NHS dentistry, and when will she implement an urgent review of the system?

Rosie Winterton: In the hon. Lady's constituency, some 14 of the 33 practices in the PCT are accepting new patients. We know that the number of units of dental activity commissioned has increased from 77 million last April to 78 million; some of them are yet to be provided, but they have been commissioned. We know that NHS dentistry is expanding, and that new contract is working. We have a review group to ensure that we continue to discuss the implementation of the contract with the profession and representatives of patients. The hon. Lady is quite wrong to say that the new contract is not making a difference. It is.

Tom Brake: In the past couple of months, I have had 7,000 health survey responses returned to me, and 70 per cent. of respondents said that getting access to an NHS dentist was extremely difficult. Furthermore, according to an orthodontist I met yesterday, the situation will get worse when the contracts expire in 2009. What discussions has the Minister had with PCTs about provision after 2009? At what point would she expect PCTs to inform the dentists of their plans, so that dentists can prepare their own investment plans and budgets for post-2009?

Rosie Winterton: I am not saying that the situation has been fully resolved—far from it. What I am saying is that the new dental contract is proving that we can increase access to NHS dentistry. As I said, already approximately 500,000 more people are able to get access to an NHS dentist. One thing is absolutely clear: if an NHS dentist leaves the NHS, we now have the money at local level to recommission NHS dentistry. That is the difference between the old contract and the new one—now, local people have power to recommission at local level.

Lindsay Hoyle: My right hon. Friend needs to stop making excuses for the primary care trusts. She has given them the money and they have it, but they are not providing the dentists. We do not have NHS dentists. The waiting lists are growing and there are no vacancies for the people in Chorley. Please get a grip: make the PCTs spend the money and make them provide NHS dentists. They are letting her down.

Rosie Winterton: The PCTs are not allowed to spend the money allocated to dentistry on anything else; they cannot switch it to other services. We work closely with the PCTs, through the strategic health authorities, to make sure that if an NHS dentist leaves the NHS, the PCT recommissions at the local level. If my hon. Friend knows of examples in which that is not happening, I am more than happy to meet him to discuss the issue.

Laura Moffatt: Does my right hon. Friend agree that denturists, the highly skilled people who make dentures, particularly for older people who may not have been able to look after their teeth as well as people can now, are an important facet of dental services? I am deeply grateful to her for the many letters that we have exchanged, and she is to see me and one of my constituents, a denturist, about the issue. Will she say whether there might be any changes to the rules to allow people direct access to denturists, or any other changes that might be helpful to many thousands of people?

Rosie Winterton: Obviously, the issue of denturists being able to treat patients directly has been discussed. It is difficult, because the regulations insist that proper training be undertaken. If people who had not undertaken that training practised directly on patients, it would be illegal. We have had to consider that carefully. It is important that proper training be available to people performing that health care task.

Paul Beresford: I clearly have an interest in the subject. People outside the House in NHS dentistry do not quite recognise the glorious oil painting that the Minister just painted. Will she tell the House what changes she has introduced through the implementation group that she set up at the beginning of the contract—or was that just a sop to keep the dentists quiet?

Rosie Winterton: The issues that we are considering, particularly as we come to the end of the first year, have to do with the banding system and units of dental activity. We are looking carefully at whether dentists are able to meet the targets that have been set relating to units of dental activity. The evidence is that the vast majority have been able to meet the requirements of the contract. The group is a way of keeping an open dialogue about any difficulties that occur. I will write to the hon. Gentleman. On a number of occasions, we have been able to issue further guidance to PCTs about some of the issues raised through the review group.

Phyllis Starkey: Milton Keynes primary care trust has used the new system very effectively to open new dental surgeries and completely clear the waiting list. Will the Minister take steps to make sure that that good practice is spread to those PCTs which do not seem to be performing as well as that PCT does?

Rosie Winterton: My hon. Friend is absolutely right. There have been good instances of PCTs taking real action to recommission services and really prioritise dentistry. Lincolnshire, which is represented by the hon. Member for Grantham and Stamford (Mr. Davies), has taken real steps forward in recommissioning dentistry, and I am sure that he appreciates the works of the Labour Government.

John Penrose: The Minister may not be aware that the incidence of tooth decay among under-fives in my constituency is above the national average. What specific measures is she taking to ensure that some of the resources that she has described this afternoon will be targeted on the dental health of that important group?

Rosie Winterton: We have introduced a number of initiatives, such as Brushing for Life, which works through schools. It is about teaching young children how important it is for them to keep brushing their teeth, using fluoride toothpaste. There are a number of public health initiatives that have been very successful. Obviously, local authorities and PCTs can now consult on the issue of fluoridation, which can in itself be very helpful in improving dental health.

Kevan Jones: Will my right hon. Friend congratulate County Durham PCT on the opening of the new Pelton Lane Ends NHS surgery in my constituency, as it not only offers provision for existing NHS patients but extends NHS provision to those of my constituents who were abandoned by the private sector?

Rosie Winterton: My hon. Friend is quite right. At our meeting yesterday it was encouraging to look at the steps that the PCT has taken to deal with an area with poor access to NHS dentistry. The majority of people are on quite low incomes, so they could not purchase private sector dentistry. That is therefore a very good example of the way in which PCTs that prioritise dentistry can provide for many thousands of people care that has been severely lacking for some years.

NHS Trust Deficits

Henry Bellingham: .

Andy Burnham: I meet the chief executive of the East of England strategic health authority on a quarterly basis to discuss finance and other topics. For 2007-08, all PCTs in East Anglia and the east of England are forecasting financial balance.

Henry Bellingham: Can the Minister explain why he and his ministerial colleagues allowed the new Norfolk PCT to start operating with a £50 million deficit? Is he aware of the widespread concern in East Anglia that a number of accident and emergency units are under threat, and can he confirm that there will be no linkage between strategic health authority deficits and the closure of A and E units?

Andy Burnham: As I said a moment ago, the health economy of which the hon. Gentleman's PCT is a part is forecasting financial balance this year. In addition, it will make progress on our 18-week target, effectively bringing an end to waiting and to waiting lists. All PCTs in the country have to plan for their own local services and get services in the right places that are convenient for the population. I wish that the hon. Gentleman and his colleagues would stop trying to perpetuate the myth that financial pressures are causing cuts to services such as A and E, because it is simply not true.

Bob Blizzard: The East of England strategic health authority figures show that even though Cambridgeshire PCT has the highest funding allocation per head, it was the biggest overspender in the eastern region. My own PCT has successfully managed down its own modest deficit, but the strategic health authority took some of our money to bail out Cambridgeshire. Will my hon. Friend tell me when we will get it back?

Andy Burnham: My hon. Friend has just put his finger on the unfairness of a health funding system that allowed overspending to continue, thereby taking money from other parts of the country that needed the resources to improve the health of the population. I pay tribute to his PCT, which moved from an in-year deficit in 2005-06 to a surplus last year. If his PCT has got its house in order, others can do so too.

Norman Lamb: As the Minister reflects on how those trusts are struggling to cope with deficits and to deal with a substantial programme of reform at the same time, is he minded to agree with the chief executive of the NHS, who said:
	"How can you drive through this degree and nature of change from the centre? The answer is that you can't"?
	Does he agree that the current structure is hopelessly over-centralised and that independence, as proposed by the Conservatives, will not change that at all? What we need is local, democratic accountability for local health services.

Andy Burnham: If I can decode what the hon. Gentleman said, he wants to retreat to a comfort zone where we tolerate practices that allow overspending to continue. Parts of the reform programme, however, have shone a spotlight on areas where inefficiency has been tolerated for far too long, and the tariff system has made people ask questions of their own operation so that they can achieve more efficiency. Our 18-week target is hammering out unnecessary delays in the patient journey, and making sure that there is better and more productive use of resources. The reform measures that we have put in place therefore do not contradict at all the goal of financial balance. In fact, they help trusts to achieve it.

Complementary and Alternative Medicine

David Tredinnick: What guidance her Department has produced for primary care trusts on the role of complementary and alternative medicine in innovative service redesign.

Caroline Flint: The Department has published guidance on practice-based commissioning which enables the delegation of indicative budgets for services including complementary and alternative health therapies. "Our health, our care, our say" states that primary care trusts will be expected to support practices that are innovative and provide services that promote patient choice—for example, complementary medicine.

David Tredinnick: That sounds fine. The trouble is that there is no specific direction that there should be guidance, although 75 per cent. of the population want those services on the health service. What, for instance, does the Minister intend to do now that the scientific survey on Echinacea has been published, which shows that that remedy can cut colds by 50 per cent., as well as the duration of a cold? Is not that the sort of guidance that should be offered through the primary care trust? Will she revisit the subject and see what she can do?

Caroline Flint: I am sure the hon. Gentleman agrees that it is very important that clinicians are on the front line in deciding what is required for patient care. Clearly, doctors are accountable for any treatment that they give their patients, both conventional and complementary. The National Institute for Health and Clinical Excellence has produced guidance in certain areas—in relation to multiple sclerosis and on supporting care for patients who have cancer. We are working with the foundation established by the Prince of Wales for integrated health to look at ways in which we can encourage voluntary self-regulation in certain areas. We also have some outstanding work on which we hope to report by the end of the year; it concerns bringing aspects of acupuncture and herbal medicine under statutory regulation. No doubt the hon. Gentleman would agree that, like medicine, politics has alternatives. I am so pleased to see that the hon. Member for Grantham and Stamford (Mr. Davies) has chosen an alternative called Labour.

Andy Reed: As my hon. Friend knows, the rise in obesity and type 2 diabetes is causing enormous problems, particularly among young children and those growing into adulthood. What is she doing to ensure that part of the health budget is used for physical activity and sport, rather then relying on the Department for Culture, Media and Sport and others to provide those facilities? Will she ensure that GP referral schemes are available throughout the country, and that people are encouraged through marketing to take up physical activity?

Caroline Flint: I thank my hon. Friend for that question. In the framework of health and well-being on which we are consulting, there are a number of examples showing how GPs can be innovative in the referrals that they make, including referrals for physical activity. We have just completed the physical activity care pathway, which is a tool that doctors and others can use in order to determine what levels of physical activity are needed by adults and young people. I hope that in future, in line with value for money and effectiveness, we will see much greater emphasis on preventive care and on ways of encouraging people, young or old, who are suffering from obesity to tackle that problem through exercise, with the support of others, and most importantly, through personal responsibility.

Accident and Emergency Services

Gordon Marsden: What assessment she has made of the extra demand for NHS acute and accident and emergency services in seaside and coastal towns from visitors during the peak tourist season.

Andy Burnham: It is a matter for the local NHS to ensure that it has arrangements in place to plan for and respond to increases in demand. Where demand comes from outside a primary care trust's area—for example, because of a large tourist population—providers can recover costs from the patient's home primary care trust.

Gordon Marsden: My hon. Friend knows that in a town such as Blackpool, which has almost 10 million visitors a year, the extra pressures are considerable—some 8,000 people seen out of hours, some 4,500 seen on a temporary resident basis, and some 11,500 seen at the walk-in centre. Although I accept my hon. Friend's point, that hard work provides testament that the additional pressures on Blackpool and other seaside towns are not fully met by the procedure that he set out. Will the Department examine the funding formula with other appropriate Departments and see whether the pressures of day visitors as well as temporary one and two-week residents are properly catered for? That was funded by the Department of Health—

Mr. Speaker: Order. Supplementary questions must be brief.

Andy Burnham: I am indeed aware of the pressures that my hon. Friend talks of, as a regular visitor myself to the Sandcastle water park with my son. Indeed, I have nearly had cause myself to visit his local walk-in centre and A and E. I have looked in detail at the issues that he raises, and I believe that he is raising a genuine and fair point. There are changes proposed in relation to payment by results that would effectively de-host, as we put it, A and E services, which would mean that A and E costs could be reclaimed from another PCT—the PCT responsible for the tourist in question. Having looked at the figures, it appears to me that his trust is not succeeding in recovering the money that it spends on treating patients from elsewhere in the country. It appears that he has a valid point, and I shall look further into it.

Midwives

Philip Hollobone: To ask the Secretary of State for Health, if she will make a statement on her Department's plans to make it a legal requirement for all independent midwives to have professional indemnity insurance.

Ivan Lewis: The Government's policy is to include provision for compulsory indemnity cover as a condition of registration for each profession as the opportunity arises in wider legislative change. No date is set for the implementation of the policy specifically in respect of midwives.

Philip Hollobone: Given the national shortage of midwives, may I urge the Government to do far more to encourage independent midwives in their profession, including all those in the Kettering constituency who have written to me to highlight the problem?

Ivan Lewis: There is a real issue of professional indemnity, but we do not want to create a situation in which we make life impossible for independent midwives. That is why we are working closely with their representative organisations to try to find a solution. Before professional indemnity was required of midwives, secondary legislation would be required in this House. We are not at that stage yet, and we intend to do absolutely everything we can to work with midwives to see a satisfactory way forward.

Nicholas Winterton: The Royal College of Midwives, of which I am an honorary vice-president, has clearly stated that if "Maternity Matters", which is a Government policy, is to be fully, properly and effectively implemented, there will need to be 22,000 whole-time equivalent midwives in England's NHS in the relatively near future. Currently, there are 18,949 midwives. Would not the Minister—this is a non-party political question to him—support my hon. Friend the Member for Kettering (Mr. Hollobone) in saying that we need to give encouragement to the independent midwives if this service is to be properly managed and effective, and that they must therefore have some—

Mr. Speaker: Order.

Ivan Lewis: If we are to make a reality of choice for women throughout the country, which we are committed to do by the end of 2009—home birth, midwife-led birth and consultant-led birth—there will undoubtedly be a need for more midwives in some parts of the country, possibly including the great place of Macclesfield. It has been made absolutely clear to every local health economy that that is the expectation.
	May I ask the hon. Gentleman, as a grandee, how he feels about the belated decision of the hon. Member for Grantham and Stamford (Mr. Davies) to say "It's time for Labour"?

GP Out-of-hours Services

Richard Ottaway: To ask the Secretary of State for Health, what plans she has to review GP out-of-hours provision.

Andy Burnham: We have no immediate plans for another formal review of out-of-hours services, but we will be emphasising the importance of high quality GP out-of-hours services as part of the network of urgent and emergency care provision in the forthcoming framework document.

Richard Ottaway: The present Chancellor of the Exchequer recently said:
	"We need more access to doctors, we need drop-in centres, we need local health care centres to be more effective, we need NHS Direct to be working."
	In the light of that criticism, made after 10 years of government, does the Minister agree that it was naïve to allow GPs an opt-out from the out-of-hours care provisions?

Andy Burnham: I must remind the hon. Gentleman that the GP out-of-hours service was close to collapse when his party left office. It was simply not sustainable, and the changes that we have already made with the introduction of NHS Direct are a major improvement. Only today, we have announced that six PCTs are taking forward proposals to tender for new primary care services, which is real action to address the quality of GP and primary care services in some of the more deprived communities. What did his party do?

David Taylor: I cannot be alone among MPs in having a continuing trickle of constituents who are concerned about the deficiencies of out-of-hours care. Such cases are often moving, and occasionally they are tragic. One common feature is the out-of-hours doctor not having direct access to the patient's medical details. Will the Minister say whether the Connecting for Health IT programme includes provisions to allow organisations such as Primecare to have remote access to that information, in the interests of the patient and their family?

Andy Burnham: I thank my hon. Friend for his question. He is right to say that the quality of out-of-hours provision needs to improve in some areas. There is a set of national quality requirements against which all PCTs must monitor their out-of-hours service. He is right to raise information transfer, because the report into the tragic death of Penny Campbell highlighted the need to transfer information between clinicians, and we reiterated that point to the wider NHS in response to the coroner's report. My hon. Friend is right to say that the Connecting for Health programme has the potential to bring major improvements in patient safety by giving any clinician in the country access to relevant and up-to-date records for the patient before them.

Andrew Lansley: The Minister will recall that the Public Accounts Committee said that the introduction of the new out-of-hours contracts was shambolic. Privately, Ministers say that they inherited that situation from their predecessors, so what advice would they give to their successors on how to improve out-of-hours care?

Andy Burnham: I can confidently say that we have improved out-of-hours care. Indeed, the National Audit Office review of out-of-hours services found that those services are broadly on track and improving. Indeed, satisfaction levels for out-of-hours care show that eight out of 10 patients say that their care is satisfactory. Again, I remind the hon. Gentleman that the out-of-hours service was close to collapse in parts of the country. GPs were not joining the profession, because they were not prepared to take on a 24-hour commitment to providing out-of-hours services. The hon. Gentleman should remember the facts and the history before lecturing us at the Dispatch Box.

Andrew Lansley: Tell that to the people in Cornwall. The Minister might at least have shown some evidence of what needs to be done to improve out-of-hours care. Why, for example, are there so few occasions when GPs have used practice-based commissioning to take responsibility for commissioning out-of-hours care, even if they are not personally responsible for its delivery?
	The Secretary of State and Ministers can cheer up, because they have only got 24 hours to go. They could use that 24 hours to save the NHS, but unfortunately they have no idea how to do it.

Mr. Speaker: Order. The hon. Gentleman must know that there are other questions on the Order Paper.

Andy Burnham: We have good cause to be cheerful this afternoon. The parliamentary Labour party is one bigger, and the Conservative Benches have been depleted by one.

Mr. Speaker: Order. We will leave it at that.

Islington PCT

Jeremy Corbyn: What representations she has received on health spending by the primary care trust in Islington.

Ivan Lewis: Ministers have regular meetings with Members of Parliament and other stakeholders about spending on health services in London. We also receive a regular flow of correspondence from across the country, including London.

Jeremy Corbyn: The Minister will be aware that there has been a large increase in PCT spending in the borough of Islington in the past 10 years and that the number of doctors has doubled. In the next five years, the borough's population is likely to rise by 14,000, and there are already enormous demands on overstretched mental health services. What consideration is he giving to the needs of mental health, as funded through the PCT, in future spending rounds and the future allocation of funds for inner-city areas such as mine?

Ivan Lewis: There has already been an average increase of about 19.5 per cent. over the past two years in my hon. Friend's local primary care trust. We recognise that population changes and demographic changes, as well as the fact that we want mental health services to be regarded as a priority, will be a central part of the deliberations that inform the comprehensive spending review discussions, which are still under way. Those discussions will be concluded in the autumn, when the level of resource available to my hon. Friend's primary care trust and those of other Members will be clear.

Flooding (England)

David Miliband: With permission, Mr. Speaker, I should like to make a statement on the serious flooding that has affected large parts of England in the past 24 hours. As the House will know, the flooding was caused by the most exceptional weather conditions: up to 100 mm of rain in 24 hours in several places. This follows an unusually wet month with up to double the normal average monthly rainfall, which has saturated the ground and caused rivers to rise above their normal levels for the time of year.
	Sadly, I have to report the confirmed loss of three lives: a 68-year-old man and a teenage boy died in separate incidents in Sheffield, and a 28-year-old man died in Hull. I am sure that the whole House will want to join the Prime Minister in extending our very deep sympathy to the families and friends of all those who have lost their lives in these tragic incidents.
	It is estimated that some 1,000 properties have been flooded in and around Sheffield, Nottingham, Leeds, Hull, Grimsby, Rotherham, Doncaster, Cheltenham, Shropshire and elsewhere. We all know that flooding is every householder's nightmare. Within the past two hours, the Minister for Climate Change and the Environment, my hon. Friend the Member for Dudley, South (Ian Pearson), has attended the Gold Command meeting, and he is visiting some of the affected areas in south Yorkshire today. He will see for himself, and will report back to me on, the major impacts that the floods have caused. These are traumatic events, especially for the elderly people involved, and every effort will be made to support them.
	This morning, the Environment Agency had in place 25 severe flood warnings, 133 flood warnings and 129 flood watches, mainly concentrated in Yorkshire, the midlands and Lincolnshire. The situation does, of course, remain subject to regular change. River levels are dropping in the upper catchments today, although they will still rise further downstream. Flood defence operations are in place, including, where appropriate, temporary defences.
	The House will have seen reports of very real dangers associated with the Ulley reservoir near Rotherham. The emergency services are working to control the situation, utilising high volume pumps that have recently been bought for the fire and rescue service through the good offices of my right hon. Friend the Secretary of State for Communities and Local Government. The situation is potentially serious. Gold Command is monitoring developments very carefully and contingency arrangements are being made. Two hundred and fifty people from the downstream area have been moved from their homes, and the M1 motorway has been closed as a precautionary measure.
	The founding principle of the emergency response system is for decisions to be taken locally through an integrated structure, with the police in charge once Gold Command is activated. I am sure that the House will want to pay tribute to the heroic efforts of the many who have responded so magnificently to this event at local level. These include the staff of the fire, ambulance and police and other rescue services, local authorities, the Environment Agency and the voluntary sector. We know just how hard the fire and rescue service worked in the ultimately vain attempt to rescue the man trapped in the drain in Hull, and saw on television the RAF search and rescue helicopters airlifting people at risk in Sheffield. Otherwise, there has been no requirement for armed forces support. However, armed forces liaison officers were deployed to Gold Commands yesterday afternoon, notably in Humberside and Sheffield, and are ready to provide support if required. Overall, some 1,400 people have been provided with emergency shelters and other temporary accommodation. The community spirit in all the affected areas has, from all the reports that I have received, been outstanding.
	It is clearly much too early to make a full assessment of the event. All relevant lessons will be learned once the immediate priorities have been met. However, I have been assured that the Environment Agency's new Floodline Warnings Direct system performed well in issuing warnings to very large numbers of people in areas affected.
	Some water flowed over the flood defences as the unprecedented rainfall exceeded what they were designed to deal with, but there had been no reported structural failings of flood defences. The local authorities are responsible for the short and longer-term recovery effort in the affected areas, and I am sure that elected members and officials will rise to that challenge. The relevant Government offices and other agencies will work with the local authorities to support them in that process.
	Emergency financial assistance is available to local authorities under the Bellwin scheme to help with non-insurable clear-up costs incurred in taking immediate action to safeguard life and property following a disaster or emergency in their area. Local authorities have one month from the end of an incident to notify the Department for Communities and Local Government that they intend to apply for activation of a Bellwin scheme. If approved, that Department will usually reimburse an authority for 85 per cent. of its eligible costs above a threshold related to the authority's annual budget.
	I am also pleased to note that insurers are playing their part in the recovery, and that the Association of British Insurers has advised that its members have staff in place to ensure that claims are tackled promptly.
	Ministers and officials in my Department and elsewhere in Government have kept in close touch with the events around the country without getting in the way of the local delivery effort. I spoke last night at 10.40 pm to the chief executive of Sheffield city council and this morning with the chair of the Environment Agency. It is clearly most efficient that decisions on how to manage the event are taken locally, drawing on local emergency plans. Again, those seem to have operated well.
	For many people, the immediate task is one of clean-up. However, it is also vital to prepare for any further wave of extreme weather. Heavy rain later in the week remains a real threat and all the appropriate agencies remain on high alert. I will report any further significant short-term developments to the House.

Peter Ainsworth: I thank the Secretary of State for his statement and the advance notice that he provided of it. I entirely endorse his remarks about the three people who tragically lost their lives. Our thoughts and prayers are with them, their friends and families.
	I join the Secretary of State in paying tribute to the immense hard work of the emergency services and those in the police, local authorities, the Environment Agency and the armed forces, who responded to the crisis with courage and the highest standard of professionalism. Will he join me in sending a message of admiration to the people of Leeds, Sheffield, Hull, Rotherham, Doncaster, Shropshire and so many other places, who have shown great resilience and fortitude in the face of the worst flooding in living memory? Our thoughts are with them as they struggle to come to terms with what has happened.
	Clearly, the weather conditions that led to the events are almost unprecedented, but how satisfied is the Secretary of State that the warning systems in place were operated effectively? The Met Office issued a weather warning on 12 June, which stated:
	"The worst affected areas are likely to be northern parts of England, where rainfall totals over a few days may be close to the monthly average for June."
	On 15 June, my right hon. Friend the Member for East Yorkshire (Mr. Knight) raised his concerns in the House and called on the Secretary of State to make an urgent statement on the action that he would take to prevent people from facing the misery of having their homes flooded.
	In the light of those warnings, what action did the Secretary of State take in advance of the problem? They were not the only warnings that the Government received. On 14 June, the National Audit Office issued a damning report on the adequacy of our flood defence systems. It noted that the north-east had received less funding for flood defences than other parts of England, where the risk of flooding was assessed as less acute. The Chairman of the Public Accounts Committee also drew attention to the imbalance in spending. In other words, several warnings were issued within days of each other and of the dreadful events. Is the Secretary of State entirely satisfied that his response to them was not complacent?
	The statement stressed the importance of the local response system, but what of the Government's responsibilities? Does the Secretary of State regret the fact that the Environment Agency was forced to make cuts in its flood protection budget last year to compensate for financial mismanagement in his Department? Does he know that the Environment Agency and the Association of British Insurers have been urging the Department to take the risks of flooding far more seriously for several years? Does he regret that he has failed to do that? He said that he is keen to learn lessons. Is not one of them that it is normally a good idea to listen to the experts when they provide expert advice?
	In Sheffield, much of the damage has occurred in Brightside, one of the poorest districts. Can the Secretary of State make an assessment at this stage of the amount of uninsured losses that have occurred?
	The Environment Agency has said that what we have experienced in the past 48 hours is consistent with the effects of climate change, and that the risk of flooding and extreme weather events will only increase. As the Secretary of State knows, climate change scientists have been warning the Government for years of the need to adapt to climate change. How have the Government responded to those warnings? Will the Secretary of State take the opportunity of the forthcoming Climate Change Bill to introduce annual reporting on the measures taken to adapt to climate change as well as those taken to mitigate its effects?
	Will the Secretary of State take the opportunity of the forthcoming water price review to issue new advice to Ofwat and the Environment Agency to ensure that adequate investment in adaptation measures is funded in future? Will he also hold urgent discussions with the Secretary of State for Communities and Local Government, or her successor, on the lunacy of continuing to build houses on flood plains?
	Does the Secretary of State accept that if his Government fail to respond to the challenges of climate change with a coherent, joined-up approach and a much greater sense of urgency, the terrible events that we have witnessed in the past few days are likely to happen again and again?

David Miliband: If the hon. Gentleman chooses, in the cold light of day tomorrow, to look at the contents of his remarks in  Hansard, he will see that, unusually for him, they did not do justice to his knowledge in this area or to the way in which he has approached these issues, certainly in the 15 months that I have been in this post. The people of Sheffield and the other affected areas will have listened with some dismay to the way in which he approached this task.
	The hon. Gentleman rightly sent a message of admiration, and I am sure that it was inadvertent that he did not mention the health services. It is important that all the public services should be recognised for the important work that they have been doing. As he said, these are almost unprecedented conditions. We shall have to wait for the historians to tell us whether they were completely unprecedented. The weather warnings are an important part of our local planning system, and the reason why the local system has worked well is that the local people in charge took heed of those weather warnings. In my conversations with people on the ground, they have told me that, where the emergency services have been brought into play and local authorities' own social services provision has been needed, the systems have worked well. That is testimony to the good preparation that has been done.
	The hon. Gentleman referred to the NAO report. The chief executive of the Environment Agency will be speaking to the PAC tomorrow. I do not want to get in the way of her defence of what has happened, but it is important to point out to the House that, between 2003-04 and 2005-06, the agency exceeded its target for protection, achieving flood protection for 100,000 houses, rather than the 80,000 target. Furthermore, there are 24,000 miles of flood defences around the country that are maintained by the Environment Agency. Many people who know this area will have been astonished that the hon. Gentleman—who speaks for a party that left us with a flood budget of £307 million in 1996-97—failed to mention that that budget is now £615 million. It has doubled under this Government. I hasten to add that, on almost every occasion, the Conservatives have voted against the measures designed to raise that budget.
	I do not yet have a listing of the uninsured losses, but I am happy to write to the hon. Gentleman with that information in due course. He made the link with climate change, which I am sure is in many people's thoughts. I want to make two points on that. First, climate change involves not only global warming but extreme weather events. However, it is unwise to seize on one event before the scientists have had a chance to make a full assessment of it, and before I did so, I would want to be sure that they were clear about the links to climate change.
	Secondly, the hon. Gentleman raised the question of adaptation, which I am pleased about, and asked for annual reports on that matter. We have made it clear in the Climate Change Bill that there should be regular reports, but we think that a five-yearly basis is the right strategic basis on which to make these judgments. However, I will take into consideration his comments when we consider the draft representations of the Special Committee that is considering these issues.

David Blunkett: All Members from the affected areas will welcome the Secretary of State's statement, and the fact that he has come to the House so quickly today to make it. I reiterate that our hearts go out to those who have been bereaved and to those who have lost so much in terms of their homes and businesses. I also commend the Gold Command for the direction that has taken place over the past 48 hours, and the public and emergency services and the RAF, all of whom have done a phenomenal job.
	Will the Secretary of State confirm that he is prepared to cut through the bureaucracy that often surrounds financial intervention on occasions such as this by ensuring that, alongside rapidly dealing with the Bellwin formula once the claims are in, there is assistance, perhaps through emergency loans, to help the families and businesses who are faced with sheer devastation? He mentioned that the armed services were on standby, so will he consider getting them and their engineers in as quickly as possible to ensure that if there is a further deluge, as predicted by the weathermen, we have other emergency measures in place by this weekend, so that there is no repeat of what has happened over the last 48 hours?

David Miliband: My right hon. Friend speaks with considerable authority having played a central role, if not in creating, certainly in upgrading the Gold Command structure that has proved its worth over the past 24 hours. We will certainly look at all suggestions about how we can support local people in coming to terms with this unprecedented event. In respect of a further deluge, the decision-making structure deliberately puts power in the hands of local people so rather than me making the decisions I assure him that all appropriate forces and provisions are at the disposal of local people in preparing for whatever contingencies lie ahead.

Christopher Huhne: I thank the Secretary of State for advance sight of his statement. As he said, our sympathies go very much to the families of the three people who we know have died as a result of the floods and to all the others who have suffered such terrible losses. My admiration, too, goes to the emergency services, the Environment Agency staff and all the other public services doing gruelling work to avert worse calamities.
	My admiration, however, does not yet extend to the Secretary of State, who has—it seems to me—mishandled the issue of flood defences ever since he took over the Department. Is it not astonishing at a time of climate change that the Government cut spending on flood defences last year, in-year, by £15 million? Will the Secretary of State confirm that in York and elsewhere those cuts delayed projects by delaying feasibility studies? Is it not even more astonishing that last month the regional flood defence committees were sent a document by the Environment Agency, which said:
	"Our planning assumption is that our resource settlement over the next three years will be flat cash in line with our current 2007-8 baseline (a real time reduction in funding) with any growth limited to capital investment"?
	Will the Secretary of State confirm that as late as last week the Treasury was continuing to press his Department for real cuts in flood defences? Does not that show a devastating lack of foresight on the part of the Chancellor of the Exchequer, and is it not yet another example of how lamentably he fails to understand the significance of climate change?

David Miliband: I assure the hon. Gentleman that his admiration for me is fully reciprocated. He has confirmed his unenviable reputation for being someone who never misses an opportunity for opportunism and I congratulate him on his consistency.
	The hon. Gentleman knows that it is simply not true that capital spending was cut last year— [ Interruption. ] My hon. Friend the Member for Carlisle (Mr. Martlew) nods because he knows that. The hon. Gentleman will also know that in respect of revenue spending the delays last year to which he referred have been more than made up in 2007-08 already, so in the context of a doubling of spending his point is pretty weak. In respect of the Environment Agency's planning assumptions, the hon. Gentleman claims a knowledge of economics so I do not know what other basis he thinks the agency should be using to plan for the future. Given that we have not yet made a settlement, it seems prudent to act on that basis, just as it would be prudent for the hon. Gentleman to wait until our comprehensive spending review announcement to see how the Government will continue to do justice to the important issues of flood defence.

George Mudie: I warmly support the remarks made by my right hon. Friend the Member for Sheffield, Brightside (Mr. Blunkett) on the need for urgent action before the weekend. In the longer term, will the Secretary of State agree to review the decision of the Environment Agency to shelve the £100 million scheme that was designed to protect Leeds city centre? Will he also ask the Environment Agency to expedite the Wyke Beck scheme in my constituency, which will help to alleviate flooding in an area that has been flooded three times in three years, to the great distress of hundreds of people?

David Miliband: My hon. Friend makes an important point. I will certainly take up those issues with the Environment Agency, and write to him as soon as possible.

David Curry: Does the Secretary of State understand the frustration and anger of people in Ripon, which has had its second bout of major flooding in seven years, not because there are no plans to deal with the flooding, but because the plans have been in existence and ready to go for several years, and have been deferred each year? How many once-in-a-century events must take place before something is done?

David Miliband: The tenor of most of today's contributions has been to recognise that such events are likely to happen much less frequently than once in a century—they are almost unprecedented events. The right hon. Gentleman, however, makes an important point. Like many other hon. Members, he wants increased spending on flood defence. Perhaps I might gently suggest to him that he persuade some of his colleagues to be as enthusiastic in their support of Government policy as he sometimes is.

Clive Betts: I thank my right hon. Friend for his statement. Obviously, I associate myself with the expressions of condolence to the families of those who have lost their lives and sympathy for everyone who has suffered in this appalling tragedy. I thank council officers and all the other workers in Sheffield who strived so hard last night to ensure that an appalling situation did not become even worse.
	May I make two financial requests? First, a lot of the damage last night was done in the main industrial area of Sheffield, which has been doing well in recent years. Some businesses, however, will now be out of action for several days, if not weeks, and will have lost a lot of specialist and expensive work in hand. Eventually, that may be recoverable from insurance companies, but in the meantime they will probably need some help through an emergency fund for cash-flow purposes. Will the Secretary of State consider that? Secondly, the public infrastructure of the city has been badly damaged. While the Bellwin formula will help with the clean-up, we will need longer-term help with investment in that public infrastructure, to ensure that the city's economy can be kept going forward. Can the Secretary of State give assurances on both those points?

David Miliband: From speaking to my hon. Friend last night, I know that he is in close touch with many of his constituents. I echo what he said about the excellent work of council officers in preparing for and responding to the event. He makes an important point in respect of local industry, and I concur completely that Sheffield's renaissance has been magnificent in the past few years. I will speak this afternoon to my right hon. Friend the Secretary of State for Trade and Industry about the industrial issues raised. In respect of long-term investment, my hon. Friend will know better than I that an extensive plan is in place for upgrading the public infrastructure in the heart of Sheffield. Obviously, we will talk with the city council about how that can be taken forward in the new circumstances.

Michael Jack: With unerring accuracy, the Government's chief scientific adviser, Sir David King, in his foresight report a few years ago, predicted that we were moving into a period of more extreme weather events. With that in mind, will the Secretary of State assure the House that resources will be made available to the Environment Agency to revise its flood prediction computer model so that it can take into account what now appears to be an established change in the nature of our climate and weather and make our predictions on flooding more accurate?

David Miliband: With the small proviso that the change in weather patterns means that there is less of a pattern, and that it is harder and harder for any model to predict with certainty some future patterns, the right hon. Gentleman makes an important point. I am happy to talk to the Environment Agency again about the way in which it works. We are coming up to the beginning of a three-year comprehensive spending review period, and that is a good moment to ensure that the money is being spent in the right places.

Diana Johnson: I join hon. Members in paying tribute to everyone who is coping so well with the flooding. In particular, I pay tribute to the public services in Hull, which valiantly tried to rescue Michael Barnett yesterday, who sadly died in a drain in Hull. Will my right hon. Friend reassure me that the public health implications of flooding are being addressed?

David Miliband: There is no suggestion that they are not being addressed. I am happy to ensure that either myself or my hon. Friend the Minister for Climate Change and the Environment, who is in south Yorkshire, checks on that. If she has a particular issue to raise, perhaps she could let my office know. She makes an important point. We would certainly want to ensure that all the right measures were in place.

Nicholas Clegg: Obviously, I endorse the salute that has been given to the emergency services and specifically to the council officers in Sheffield, including Sir Bob Kerslake, the chief executive, who have done a magnificent job overnight, not least by keeping all Sheffield MPs and others updated on the events. Will the Secretary of State join me in extending special condolences to the family and friends of Ryan Joe Parry, a young 14-year-old boy? He attended King Ecgbert school in my constituency and tragically, at such a tender young age, lost his life when he was swept up by the River Sheaf in Millhouses park.
	Much was said in the statement about the need for insurance companies to move quickly, and for health and safety and long-term funding issues to be addressed, but will the Secretary of State address himself to one thing, which I think might be overlooked? It might sound parochial, but my constituents have got in touch with me this morning in large numbers to say that one of the real problems, and one reason why so much water from the hills in Sheffield has swept down with the velocity that it has, is the degraded state of large parts of the road surface and drainage system in Sheffield. That is a familiar problem to all Sheffielders. It cannot, frankly, be dealt with with the resources available to Sheffield city council on its own; it requires central Government long-term assistance.

David Miliband: Before I respond to the hon. Gentleman's point, I hope that he will forgive me if, in response to the question asked by my hon. Friend the Member for Kingston upon Hull, North (Ms Johnson), I explain to the House that I have been passed a piece of paper which says that public health messages have been issued by primary care trusts.
	It is invidious to pick out one victim out of three. I am sure that no one in the House would want me to do that. However, the loss of a 14-year-old life—as I understand it, he was a constituent of the Minister for Sport, my right hon. Friend the Member for Sheffield, Central (Mr. Caborn), and he was at school in the hon. Gentleman's constituency—is an unimaginable tragedy for any family. Of course, I associate myself entirely with the condolences that the hon. Gentleman offered.
	In respect of the roads in Sheffield, I have not heard the particular points that the hon. Gentleman's constituents have made, but from my briefing I know that a major road improvement plan for, as I understand it, the whole of Sheffield has been prepared, or is in the process of being prepared, for a public-private finance bid. I think that that would speak to the points that he makes. Obviously, we will have to look at the whole issue of urban drainage and whether or not the roads are contributing to flooding in considering any lessons to be learned from this tragedy.

Kevin Barron: My right hon. Friend may know that the latest reports from the national media in the last hour are that the water levels in the Ulley reservoir in my constituency are now decreasing. However, rain is predicted in the next 24 hours. Hundreds of my constituents have been moved out of their homes and are living in two local schools. The likelihood of them getting back into their homes is doubtful at this stage. Will he contact the local council to see whether it needs any immediate help?
	Notwithstanding that, the possible cost of what is happening in Rother Valley and the surrounding areas is unpredictable. We need to ensure that we get help from central Government when that is necessary and sensible in the not-too-distant future. Will my right hon. Friend's office make itself available to meet Rotherham metropolitan borough council and other councils from south Yorkshire to discuss exactly how help can be given?

David Miliband: My right hon. Friend makes an important point about the Ulley reservoir. It is good news that the water levels are declining, but I reiterate that the situation at the reservoir remains serious. It would be quite wrong to suggest that the potential problems have been resolved. The pumping out that is going on is very welcome, but equally he will have seen on television the discussion of the cracks in the reservoir walls. I take my right hon. Friend's point that there has been a good response so far. Of course we will look, within the existing established rules, at how we can support local people and councils. We will also find appropriate ways to meet Members, local council officials and leaders, whether bilaterally or all together.

Daniel Kawczynski: The Secretary of State will know that Shrewsbury regrettably has a long history of flooding. Today, many parts of Shropshire have been flooded. I am grateful to him for raising the Bellwin scheme, and I will certainly request my council to take advantage of it. There is a wet washlands scheme to protect the River Severn from flooding, which the Environment Agency has been looking at for a considerable time and I have secured Westminster Hall debates in the past on that vital scheme. Would the Secretary of State accept an invitation to meet with me and the Environment Agency representatives from Shrewsbury to discuss that scheme?

David Miliband: I thought that the hon. Gentleman was going to invite me to be in the audience for his Westminster Hall debate because he knew something that I did not know in advance of the events of the next few days. I wish him good luck with his debate. The idea of what are known as turquoise belts on the banks of rivers presents a natural way to try to contain flooding and we will certainly be interested in the results of his debate.

Alan Simpson: Many of the villages around Nottingham have been flooded and are expected to be flooded again if there are further downpours this weekend. I suspect that we are stuck with this change in our weather patterns and I accept that the Environment Agency has a key role to play in flood management. I would like the Secretary of State to address two points. First, virtually the whole of the UK is a beneficiary of Victorian over-engineering of the drains and sewerage systems, and there is now a critical case for revisiting the drainage systems that are appropriate for the 21st century. The water companies have been very good at managing tidal flows of cash into their own pockets, and it would be helpful to place a duty on them to put an equal priority on the tidal movement of water that arrives in downpours.
	The second point is that four of the main regions in Germany have already sought to address the change in rainfall patterns and introduced tough new planning requirements, such that almost 40 per cent. of the country is now covered by laws that preclude a planning application even being considered if it does not replace the soak-away land or include reservoir facilities in the structural foundations of buildings. Will my right hon. Friend consider that as a 21st century planning requirement, if this is to be the pattern of weather conditions that we are now to face?

David Miliband: As ever, my hon. Friend speaks with authority on these issues. If I had not been here this afternoon, I would have been at a meeting with all the water companies to consider a water strategy for the next 25 years, as well as some of the issues and possibilities raised by the next water price review, in which many people would like to see environmental considerations built into the system. I am sure that he would agree that there are benefits of being the first industrialised country, but it does mean that we have an old infrastructure in many areas. I agree that we need to consider all ways of upgrading it, on both the demand and the supply side.
	In respect of planning, my hon. Friend will know that there are extensive new rules to ensure that sustainable development principles are built in, although I am happy to look at the German model in that area as in others.

Charles Hendry: It is nearly seven years since the town of Uckfield in my constituency flooded and the sympathy of my constituents will be with those so terribly affected today. However, in the course of those seven years and despite the pledges from the Prime Minister and others, not one pound has been spent to put in place the flood defences that are necessary to stop that sort of flooding happening again. Of course our hearts go out to those so terribly affected today, but can the Secretary of State give us an assurance that, in considering the nation's needs for improved flood defences, the unmet needs of those affected by the 2000 floods will not continue to be overlooked?

David Miliband: I thank the hon. Gentleman for his words, even though I understand that his constituency has not been affected this time. Of course, all needs must be considered in the appropriate way, including those of his constituents. I am sure that the Environment Agency will want to do that as it plots the priorities for its budget.

Elliot Morley: May I welcome my right hon. Friend's response to this emergency, and the success of the contingency plans? Extreme events cannot be planned for properly, and I am sure that he will review what has happened to people who have suffered the misery of flooding in their homes. However, after the last flood event, infrastructure providers such as Network Rail and the Highways Agency were required to look at how adaptations could be made to deal with the likelihood of more frequent extreme events. Has my right hon. Friend seen the reports from that review, and does he think that there should be a close examination of whether it has been implemented properly?

David Miliband: My right hon. Friend was significantly responsible for the response to the Carlisle flood, which for many is a model of how to bounce back from a tragedy of that sort. I have not seen the reports to which he refers, but I shall be happy to look at the matter and to engage with him and other hon. Members about the best way to respond.

Christopher Fraser: Like other areas of the country, parts of my constituency have been flooded this week, and some of them were flooded for more than 100 days over winter. Much of the fens is at or below sea level, so will the Secretary of State give a commitment to the people who live there that proper flood alleviation programmes will be put in place? A lot of the water that accumulates in low-lying parts of my constituency flows from effective flood alleviation programmes upstream, in places such as Milton Keynes and Bedford. Do the people of the fens deserve equal treatment with people elsewhere in the country?

David Miliband: I visited some of the flood defence work going on in a constituency neighbouring the hon. Gentleman's—

Christopher Fraser: Not in mine.

David Miliband: As I said, it was not in the hon. Gentleman's constituency, but in a neighbouring constituency. He makes a very important point about the knock-on effects of different interventions. I am certainly very happy to tell him that the people of the fens have as much right as people anywhere in the country to expect that their needs are addressed in a way that is fair, transparent and open.

John Mann: I am sure that the Secretary of State will want to ensure that the Government's response is as robust in the vast number of flooded villages and towns in my constituency as it is in the larger cities. Will he give some thought as to how local authorities can be encouraged to ensure that schools and post offices are prioritised, especially in rural areas where alternatives are difficult? Kids must be able to continue to go to school: they must not be expected to take time off with their parents until September, and post offices must be brought back into operation as soon as possible.

David Miliband: I certainly hope that schoolchildren and those shopping at post offices in my hon. Friend's constituency are able to resume normal service as soon as possible.

James Duddridge: Once the initial crisis has abated, will the Secretary of State undertake to review planning policy guidance for building on floodplain areas? I am thinking specifically of the areas affected by the floods, but also of the Thames gateway.

David Miliband: The hon. Gentleman raises an important point. He will know that the Environment Agency is a statutory consultee in all planning applications. In addition, the new planning policy statement on climate change is directly relevant to many of the housing issues about which he is concerned. I commend that statement to him, as it offers a very significant way to address climate change impacts across the planning system.

Angela Smith: May I join my colleagues in expressing condolences to the families of those in Sheffield and elsewhere who have lost their lives? I also want to pay tribute to the workers in the emergency services and Sheffield city council, whose response to the crisis has been first rate. There is a sense of profound shock that our wonderful city could be reduced to something resembling a war zone in the space of a few hours. It is obvious that urgent assistance is needed to help those affected rebuild their homes, or to rehouse them while their homes are made fit to live in again. Can my right hon. Friend give comfort to the people of south Yorkshire on that point?

David Miliband: My hon. Friend speaks eloquently—more eloquently than me—about the response of Jan Wilson, the leader of the council, Robert Kerslake, the chief executive, who has already been mentioned, and the whole city council team. I agree that they have responded magnificently and I hope that that is the view of people in Sheffield. I would not want to substitute my judgment for theirs, but everything that I am being told about the response by the city council and the response of people in Sheffield suggests that they have a council in which they should have real confidence and pride. In respect of the latter part of her question, the systems that we have developed have been designed to provide as much comfort as possible in the circumstances. It would not be right for me to pretend that anyone can wish away the terrible damage that has been done. I would not want to suggest in any way that I can do that. However, we are determined to make sure that other communities are able to follow the example of Carlisle and bounce back from this sort of event.

Martin Horwood: I am grateful to the Secretary of State for acknowledging the seriousness of the situation in Cheltenham and for the prompt response of the emergency services and the Environment Agency. According to the agency, ours was a once-in-80-years flood, which caused chaos despite a brand new £23 million flood defence scheme that was designed to withstand a once-in-100-years flood. Does the Secretary of State agree that more work needs to be done on that and does he agree with us and the National Audit Office that this would be the worst possible time to cut flood defence budgets in real terms?

David Miliband: I am very happy to look at the individual circumstances of the Cheltenham case, which obviously I have not had a chance to consider yet. In discussions of a Government of all the talents, I would very much welcome all the hon. Gentleman's support for my spending review bid.

Colin Challen: May I also welcome my right hon. Friend's statement and, in particular, his response to my hon. Friend the Member for Leeds, East (Mr. Mudie) in relation to what we need to do in Leeds, which clearly has to be urgently looked at? The insurance industry will be looking at how these new extreme events may extend the nature of the risk that they have to insure. Surely that might lead them to question whether they want to take more households off-risk altogether. Will he have meetings with the Association of British Insurers and others to ensure that more people do not lose their insurance cover?

David Miliband: I am happy to reiterate what I said in my statement: we have a unique partnership in this country between public investment and the private insurance industry. I spoke at the Association of British Insurers conference last November. It is a valuable partnership that calls for responsibility on both sides, and we are determined to fulfil our side of the bargain.

Douglas Hogg: The Secretary of State will know that his Department is considering proposals to transfer locally owned sewerage and drainage systems to the utility companies, such as Anglian Water. Will he please expedite the process and bring forward his proposals as rapidly as possible?

David Miliband: I am certainly happy to do so as rapidly as possible, consistent with good government.

Jeff Ennis: My right hon. Friend will know that this is the second consecutive week that houses and businesses in the Dearne and Dove valley in my constituency have suffered adversely from flooding. In many respects, that is unique, because Barnsley does not always suffer from flooding problems. We never have in the past. Doncaster and the Don valley, in the other part of my constituency, have a history flooding, but Barnsley does not. One point that is of major concern to residents in the flooded area is that there is an outstanding planning application for a further 200 houses, which has recently been turned down by the planning authority and has gone to the planning inspectorate on appeal. Following the point made by my hon. Friend the Member for Nottingham, South (Alan Simpson), does the Minister agree that when the planning inspectorate is looking at appeals such as this one, it needs to give serious consideration to the flooding aspect? I know that he cannot make a statement on a specific planning application.

David Miliband: The end of my hon. Friend's question was also the answer, which is that I cannot comment on the individual case that is in front of the planning inspectorate, for obvious reasons. His main point, which is that we must build houses in a sustainable way—sustainable in terms of energy consumption, but also in their use of natural resources—is absolutely right, and we must reflect that in our planning system and other parts of Government policy.

Graham Stuart: As hon. Members on both sides of the House know, the flooding has had an absolutely horrendous effect on those who have suffered. All four towns in my constituency of Beverley and Holderness have suffered from flooding, as have many villages. There have been mass evacuations across the area. When all four towns in such a large rural constituency suffer from flooding at the same time, it is hard to accept that the preparations made by government at whatever level were adequate. Will the Secretary of State reassure my constituents that the Government's plans for the future will mean that if such a thing were to happen in 10 or 15 years, people across a constituency as large as mine would never again suffer such flooding?

David Miliband: When coming to a judgment on the plans, the most important thing is to study the plans and determine whether they are sensible. Obviously, it is important that we make adequate and appropriate provision for the future throughout the country. However, the hon. Gentleman knows as well as I do that the extreme weather events to which we are being subjected are taking us into new territory, which requires a new degree of preparation.

Mark Todd: May I reinforce the Secretary of State's caution about seeking further analysis of the frequency of such events? In 2000, Hatton and other villages in my constituency that suffered flooding were initially told that that was a one-in-80-year incident, yet further analysis showed that the likelihood was more like one in 40. We should not take comfort from the apparent infrequency of such events cited in initial reports.
	I draw attention to the remarks made by the right hon. Member for Fylde (Mr. Jack), who reminded us of the foresight report. We will clearly have to face such events with increasing frequency, which must reinforce my right hon. Friend the Secretary of State's efforts to gain a favourable result in the comprehensive spending review.

David Miliband: I think that one of my colleagues on the Treasury Bench was mumbling that that was a helpful suggestion and questioning whether my tactics of inveigling the Liberal Democrats to support my spending application were the wisest.
	My hon. Friend's serious point shows that we are required to think about at least the 25-year period that I was due to be discussing today with water companies and the representatives of water consumers. The five-year price review gives us a chance to take stock, but we need to examine the matter over a longer term. I am trying to do that in precisely the way in which my hon. Friend describes.

Philip Davies: The Secretary of State knows that the Environment Agency's budget has recently been under pressure. Does he agree that spending on flood defences can save an awful lot of money in the future and prevent an awful lot of human misery? Will he thus examine the Environment Agency's budget for Yorkshire, which has suffered disproportionately over the past day? Will he consider especially the situation involving the River Aire across west Yorkshire?

David Miliband: I will certainly be examining with the Environment Agency all the regional budgets that it allocates. The hon. Gentleman will be pleased to know that precisely the logic to which he points has led us to double spending in real terms on flood and coastal defence over the past 10 years. I hope that we can build cross-party support for such investment.

Mary Creagh: I associate myself with the condolences paid by my right hon. Friend and colleagues to the families of those who were tragically killed yesterday.
	In January, I received a letter from the Environment Agency that stated that the flood alleviation scheme in my Wakefield constituency for Ings Beck, which is a tributary of the River Calder, will be delayed indefinitely, although it was supposed to start this year. May I join my hon. Friend the Member for Leeds, East (Mr. Mudie) in asking for an urgent review of the way in which the Environment Agency prioritises such schemes? Wakefield has been flooded for the second time in two weeks. Many A roads have been affected, the east coast main line has been shut, and the M1 and M62 have been greatly affected because they follow the paths of the Calder, the Aire and the Hebble, which run through our city.

David Miliband: My hon. Friend speaks about her constituency with great passion and insight. As I said to my hon. Friend the Member for Leeds, East (Mr. Mudie), it is important that we examine the areas of stress and learn from weather patterns as they develop. I am committed to doing that.

Roger Williams: Home owners who suffer flood damage often fear that they will not be able to get insurance cover or that, if they do, it will be at a greatly increased cost. Will the Secretary of State assure me that he will talk with the Association of British Insurers as soon as possible, to give its members the comfort that there will be an increase in flood protection works, so that they can maintain cover at a reasonable cost?

David Miliband: The whole Government are committed to our partnership with the ABI and the insurance industry. It is obviously in the public interest, in the interest of public expenditure and the interest of home owners. I cannot say often enough that we are determined to continue that partnership and to fulfil our side of the bargain.

Brian Jenkins: Speaking from elsewhere, I want to draw my right hon. Friend's attention to the flooding that occurred in Fazeley and Elford in my constituency and place on the record my thanks to all the public service employees who worked tirelessly round the clock and who had to make decisions such as to let cattle and stock drown, so that people could be saved. That loss of cattle and stock may not be claimable on insurance, because it may be considered the result of an act of God.
	I shall not apportion blame until after the inquiry is completed. My difficulty is that, although the Bellwin formula will fund 85 per cent. of the cost, the disproportionate cost that falls on small authorities, such as Lichfield district council, will be heavy. Will my right hon. Friend use his good offices to speak to his colleagues in the Government to see whether the next grant settlement could take into account to some degree the cost of the flooding? The last thing that I want people who have gone through this nightmare to face is an increase in council tax bill next year.

David Miliband: I share my hon. Friend's good wishes for his constituents and his desire to place on record both his sorrow for what they have been through and his thanks to the public services in his area. I am happy to find out what point my right hon. Friend the Secretary of State for Communities and Local Government has reached in the local government grant settlement process, but I am glad that my hon. Friend agrees that the Bellwin scheme provides the foundation for an appropriate response.

Laurence Robertson: The Secretary of State will be aware that two rivers, the Severn and the Avon, meet at Tewkesbury and continue the length of my constituency as the River Severn. It is a great attraction, but the downside is that it makes flooding much worse. However, the situation has been exacerbated by far too much building not only on the floodplain, but close to it. Does he therefore share my alarm at the proposals in the regional spatial strategy to build thousands of extra houses in such areas? When those proposals land on his desk, will he look at them very seriously and very carefully?

David Miliband: We look at all proposals very carefully, although technically such proposals do not land on my desk; they land on the desk of my right hon. Friend the Secretary of State for Communities and Local Government. However, I assure the hon. Gentleman that the sustainability criteria are to the forefront of the regional spatial strategies and we shall be keen—indeed, determined—to ensure that flood risk is properly taken into account when planning new housing numbers.

Philip Dunne: The Secretary of State is clearly aware that Shropshire is one of the areas worst affected by the storms, but he may not be aware that Ludlow has suffered unprecedented flooding, including the sweeping away of one of the bridges and a main access road into the town. He may also not be aware that the Severn valley railway—an historic railway that provides a great tourism and economic boost to the area—has suffered more than £1 million worth of damage to its railway track. Given what he said about the Bellwin formula, will he assure the House that sufficient funding will be available to match the applications from local authorities? Is anything available for bodies that are not local authorities that have suffered major infrastructure damage? If I may, Mr. Speaker, I should like to put my question in the context of the National Audit Office comment that of the £125 million available this year for new or improved flood defences, a mere £15 million is available for urgent works. Will that really be enough under Bellwin?

David Miliband: I am grateful to the hon. Gentleman for filling me on the situation in Ludlow, of which I was not aware in such detail. I think that I am correct in saying that the Bellwin scheme is a demand-led scheme, not a capped scheme. That should provide some degree of comfort, although every case has to be examined individually. I or my hon. Friend the Minister for Climate Change and the Environment will write to the hon. Gentleman, but my understanding is that the Bellwin scheme is restricted to local authorities.

Philip Hollobone: Recent serious flooding in Kettering has led local people to point to the issue of blocked drains, and to the massive increase in the number of new houses being built. It is up to the county council to make sure that the drains are cleared, but will the Secretary of State ensure that in growth areas, where very large numbers of houses are set to be built in the next 15 years, the Environment Agency has the resources that it needs to monitor all the planning applications that come forward?

David Miliband: Certainly, we are determined to ensure, in growth areas and elsewhere, that we future-proof the provision that is made, as the hon. Gentleman suggests.

BILLS PRESENTED

Criminal Justice and Immigration

Mr. David Hanson, supported by the Prime Minister, Mr. Chancellor of the Exchequer, Mr. Secretary Darling, Secretary John Reid, Ms Secretary Hewitt and Mr. Secretary Hain, presented a Bill to make further provision about criminal justice (including provision about the police) and dealing with offenders and defaulters; to provide for the establishment and functions of Her Majesty's Commissioner for Offender Management and Prisons and to make further provision about the management of offenders; to amend the criminal law; to make further provision for combating crime and disorder; to make provision about the mutual recognition of financial penalties; to make provision for a new immigration status in certain cases involving criminality; and for connected purposes: And the same was read the First time; and ordered to be read a Second time tomorrow, and to be printed. Explanatory notes to be printed [Bill 130].

Citizens' Convention

Julia Goldsworthy, supported by Mr. Douglas Carswell and Mr. David Chaytor, presented a Bill to establish a Citizens' Convention to facilitate the involvement of people from all sections of society in considering the way in which the United Kingdom is governed; to make provision relating to the implementation of recommendations made by the Convention; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 29 June, and to be printed [Bill 136].

Energy Markets (Carbon Reduction and Warm Homes)

Alan Simpson: I beg to move,
	That leave be given to bring in a Bill to promote sustainable energy and energy efficiency; to make further provision in respect of the regulation of the gas and electricity industries; to provide Ofgem with new environmental and social duties; to make further provision about the role of local authorities in meeting the United Kingdom's carbon reduction and fuel poverty targets; and for connected purposes.
	This debate takes place at an auspicious moment in Parliament's history. It is the end of one era and the beginning of another. What connects the two eras are the serious challenges of fuel poverty and addressing climate change that will be inherited by the new Prime Minister and the framework of governance that he will bring with him. The truth is that we sit within a policy framework that is not fit for purpose, in terms of our ability to meet the targets that we have set ourselves.
	Let me give the House some of the benchmark figures that lead me to say that. First, last week I received a reply from the Minister for Housing and Planning, confirming that there are 2.2 million households in abjectly fuel-poor properties that have a standard assessment procedure rating—an energy efficiency rating—of less than 30. Department of Trade and Industry figures confirm that if there is a steady increase in energy prices, as is predicted, by 2016—the date by which we are legally supposed to have completely eradicated fuel poverty in the UK—there will be more than 3 million fuel-poor households in our country. We also know from the papers that have been produced in support of the Climate Change Bill that on current projections we will not meet our 2020 climate change commitments.
	We need a new framework—a step-change framework—that will allow us to address those points, and I have tried to incorporate such a framework in the Bill. It seeks to address four issues. First, it would give towns and cities a duty to produce their own sustainable energy plans that would meet or exceed the national targets. Secondly, it seeks to reform the role of Ofgem. Thirdly, it would introduce the concept of citizens' allowances, for both electricity and gas, to underpin a shift in the tariff system framework. Those allowances would have to be delivered at the company's lowest tariffs, and we would then move to a system of higher charging for increased energy consumption. Finally, my Bill seeks to give the Secretary of State the power to introduce feed-in tariff systems, which would have preferential payback frameworks that would give an entitlement to the citizens who provided that feed-in energy. I shall go through those four aims one by one.
	We know that by 2016 the Government hope to provide five new eco-towns that are carbon-neutral in their built design. By that time, however, Germany will have 40 to 60 eco-cities, made up of existing properties in which people are living now. That is the challenge for the UK, too. The building of 200,000 new houses a year is important, but the test is what we are going to do with the 25 million properties in which people are living today and in which, in all probability, they will live the majority of their lives. There is therefore a big step change from 200,000 properties a year to the 25 million with which we will have to deal in 10 years. If we are to get there, we must provide a different rules base for our energy system, which is why we must change Ofgem's framework or terms of reference.
	I have spent the past four or five years going round all the major energy companies, asking them what plans they have over the next five years to sell less energy for consumption. Not a single company in the land has any plans to do so. When I ask why, they say that Ofgem requires them to enter into least price competition for the sale of energy, so they are locked into short-term contracts that are suicidal in the race towards a precipice of increased energy consumption that will accelerate the problems of climate change. That must be changed by giving Ofgem a different remit so that it has a duty, first, to promote reduced energy consumption and, secondly, to promote the development of an energy market for the sale of energy services, rather than the sale of energy consumption. It would be helpful, too, if we removed some of the constraints or confines within which energy companies are required to work.
	For energy companies themselves, part of the dilemma is the fact that they are locked into the 28-day rule. They are required by the Government to spend about £560 million a year as part of their energy efficiency contribution to alleviate fuel poverty and achieve carbon reduction targets, but they do not know how to do so within 28-day contracts. They want to get out of that lock. I suspect that citizens would say pretty much what every hon. Member would say when asked whether they would sign up to a 10-year contract with an energy supply company: "There's not a cat in hell's chance, because before the ink is dry, the company will double or treble the prices, so we would be hooked into a punitively priced contract for 10 years." We must therefore move to energy services companies that are community owned or municipally owned, just as they are in large parts of Europe. By allowing those 10-year contracts between people and energy companies we can secure long-term partnership contracts that will allow the companies to spend their e-contributions in a much more productive and sustainable way.
	The most important aspect of the Bill is the Secretary of State's powers to introduce feed-in tariffs. A couple of weeks ago, I brought Hermann Scheer to Parliament. In Germany, he is recognised as the father of feed-in tariff legislation. He is a German parliamentarian, and he was responsible for piloting a measure through the German Parliament in 2000. The German Secretary of State is empowered to set tariffs that can be put in place for 20 years and, for the same period, citizens are paid up to four times the market price for clean energy that they put back into the system. That has driven the transformation of the German energy sector, so that in the last year alone it delivered 97 million tonnes of carbon savings, which is 10 times what the UK aspires to but fails to deliver. That has delivered jobs and the lead in the incorporation of renewable technologies, and it has made a radical impact on the concentration of fuel poverty in Germany. That is the core of what I hope the Bill would deliver.
	The key features of the Bill are that it would move us into a different conceptual framework for what the next energy era will look like. The Bill is both visionary and practical. It is deliverable and economically viable. It is urgent, possibly more so than anything else in my lifetime. It creates jobs, as the Germans have done—about 240,000 jobs. It takes people out of fuel poverty and cuts carbon emissions like no other single measure has been able to do. It delivers a sense of community ownership of both the climate change agenda and the determination to eradicate fuel poverty.
	It was Victor Hugo who said that there was nothing more powerful than an idea whose time had come. I believe that the combination of the four elements in the Bill encapsulates that idea, and I hope the House will determine that its time has come too.
	 Question put and agreed to.
	Bill ordered to be brought in by Alan Simpson, Mr. David Amess, Peter Bottomley, Malcolm Bruce, Mr. Dai Davies, Dr. Ian Gibson, Mrs. Sharon Hodgson, Dr. Brian Iddon, Mrs. Linda Riordan, Sir Robert Smith, Andrew Stunell and Mr. Mike Weir.

Energy Markets (Carbon Reduction and Warm Homes)

Alan Simpson accordingly presented a Bill to promote sustainable energy and energy efficiency; to make further provision in respect of the regulation of the gas and electricity industries; to provide Ofgem with new environmental and social duties; to make further provision about the role of local authorities in meeting the United Kingdom's carbon reduction and fuel poverty targets; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on 19 October, and to be printed [Bill 131].

Orders of the Day

Finance Bill

As amended in the Committee and in the Public Bill Committee, further considered.

Clause 4
	 — 
	rates and rate bands for 2010-11

Julia Goldsworthy: I beg to move amendment No. 38, page 3, line 15, leave out clause 4.
	I raise the matter again because the issue of inheritance tax seems to be exercising ever greater numbers of people, yet the changes announced on Budget day were passed almost without remark. On the face of it, those changes were good news, which one might expect the Chancellor to want to champion. Clause 4 raises the nil rate threshold to £350,000 from 2010-11—another example, perhaps, of the Chancellor trying to keep control of the Treasury long after he leaves it. The Red Book does not tell us what the cost will be to the Exchequer, because we have information only up to 2009-10. The increase comes after several years of successive increases in threshold, which is to be welcomed.
	I raise the issue in order to highlight the contrast between the increase in threshold and the rise in house prices. In 2005-06 inheritance tax raised £3.3 billion in revenue to the Treasury, and this year that is set to increase to £4 billion. Let us compare that to the rise in house prices. Between 1995-96 and now, house prices have increased by 199 per cent., according to the Halifax. Over a similar time scale, the inheritance tax threshold has risen by only 95 per cent. It is clear that the number of estates caught by inheritance tax will have increased over that period. In 1996, 15,000 estates paid inheritance tax. In 2006, that figure had increased to 37,000. Will the Minister acknowledge that the nature of inheritance tax and the objective that it is intended to achieve are changing?
	Inheritance tax is changing from a charge on the very wealthy to a charge on those who consider themselves to be on middle income, who have benefited from rapidly rising house prices. It recalls to mind an example that came to my attention in my surgery involving a couple who had lived in Cornwall all their life. They were living in two adjoining residences, one of which belonged to their parents. They failed to understand that they could use the allowances of both parents, and they did not realise until the point at which both parents had died. The total value involved was such that they had to move out of the property where they had lived all their married lives, and where their parents had lived all their married lives, in order to pay the inheritance tax bill. If they had used both parents' allowances, they would not have needed to do that. There are people who are being caught because they do not understand the system. They do not necessarily have very large incomes or live in particularly valuable properties.

Theresa Villiers: The hon. Lady is clearly concerned about thresholds, but I am slightly puzzled about why she is seeking to delete a clause that increases the threshold.

Julia Goldsworthy: The amendment is intended to allow an opportunity for debate on the Floor of the House—a debate that we have not yet had. I have no intention of pressing it to a vote; I wanted to use it as an opportunity to highlight how the nature of the tax is changing, and how what we see in the Bill is very different from the reality of many people's experiences.
	We need to look at the make-up of estates that are paying inheritance tax. Despite property price increases since 1998, the number of estates paying inheritance tax worth more than £2 million has fallen by 8 per cent. In the meantime, among estates worth £300,000 to £500,000, the number has risen by 20 per cent. We are therefore seeing a reduction in the number of estates at the very top end that are paying inheritance tax, while the number at a much lower level paying the tax is increasing disproportionately.
	I appreciate that the Government are making efforts to redress that imbalance, as we saw from the changes made last year to the inheritance tax treatment of trusts. There are many arguments to be had about whether the policy was retrospective and its impact on decisions made a long while ago, but there was clearly a feeling that people on much higher incomes were finding a way of getting out of the system and avoiding paying inheritance tax. How many more estates does the Chief Secretary estimate will be caught as a result of those changes?
	I raised the key issue during discussion of last year's Finance Bill. It is where the true inequality lies—a question that relates to lifetime gifts. People who have the benefit of easily disposable or liquid assets can make use of the current seven-year rule that applies to lifetime gifts, but people in the circumstances that I described earlier, whose only significant asset may be tied up in their estate because it is their property, cannot do so in the same way. Of course, I am not suggesting that we get rid of the rule on lifetime gifts, but I wonder whether the Chief Secretary is prepared to look again at the matter. Demographics have changed since the rule was introduced. My understanding was that the seven-year rule was introduced to give parents the opportunity to help their children to make their property purchase and get a foot on the property ladder, but the demographics have changed; people's life-expectancy is changing, for example, and as a result, people are living longer than might have been expected when the limit was introduced.

Stephen Timms: Will the hon. Lady say a little more about what change she is proposing to the seven-year rule? Is she suggesting that people should be looking at a whole lifetime? Is that the point, or is she proposing a level somewhere between seven years and a lifetime?

Julia Goldsworthy: I am coming to that point. I was asking the Chief Secretary to consider whether the Government are prepared to look again at the seven-year limit. I wonder whether a time limit of 15 years would perhaps be more reasonable, taking into account how life expectancy has changed. Of course, I recognise that we must not get rid of lifetime gifts altogether and that, even with the seven-year time limit, there is a need to keep records. Increasing the limit to 15 years, however, might make the system a little bit fairer and would not impose too great a bureaucratic burden; after all, people keep records for capital gains tax purposes and so on.
	In conclusion, the point of the amendment was to raise two key questions. Does the Chief Secretary accept that the nature of inheritance tax is changing and that the decline in the number of very large estates paying inheritance tax and the increase at the lower end means that the tax is increasingly impacting on those who would consider themselves to be at middle-income level? Does he agree that unless there is a change either to the threshold or, perhaps, the lifetime gifts rule, as I have suggested, revenues will continue to rise? If house prices continue to rise, more and more people will be caught and the nature of inheritance tax will change fundamentally. Instead of a tax on significant wealth, inheritance tax is a tax that the significantly wealthy seem to be more than capable of avoiding paying, while those who are least able to afford it end up paying a much greater proportion of it.

Theresa Villiers: Like the hon. Member for Falmouth and Camborne (Julia Goldsworthy), the Opposition recognise the concern felt by many across the country about the increase in the number of people caught in the inheritance tax net since the Chancellor took up residence in No. 11 10 years ago. Under this Chancellor, inheritance tax is no longer confined to the wealthy and now impacts on those on middle incomes, too.
	The hon. Member for Falmouth and Camborne has already told us some of the figures, and I shall add a few more. The Inland Revenue figures show that the revenue raised by inheritance tax has more than doubled under Labour, rising from £1.6 billion in 1997 to £3.6 billion last year. The Treasury expects the tax take to rise again this year to £4.1 billion. The proportion of estates liable to inheritance tax has tripled from 2 per cent. in 1997 to 6 per cent. on the most recent figures, and, as we have heard, the number of estates paying inheritance tax has more than doubled from 15,000 10 years ago to 35,000 this year.
	Many people are anxious about the potential for a further increase in the number of estates affected by IHT with the growth in house prices. Halifax has carried out some extensive research on inheritance tax and has calculated that house prices have increased by 199 per cent. since 1995-96, which is far ahead of the increase in thresholds. It believes that the number of owner-occupied houses valued over the current £300,000 threshold is double what it was five years ago and now stands at 2.3 million or 12 per cent. of owner-occupied homes.
	Particular concern is felt about inheritance tax in London and the south-east because of the high property prices. The average London property price went over the IHT threshold at the end of 2006. The Halifax research tells us that one in 10 postcodes have an average property price over the current £300,000 threshold, which is double the number five years ago. Scottish Widows has also published research about the increase in the number of home owners whom it believes now face the prospect of an IHT liability on the basis of their current net worth. A Grant Thornton study has projected an increase in the number of estates paying inheritance tax to 45,000 or 50,000 by 2009, assuming that asset prices continue to grow at their long-term average rate.
	As I said in Committee, the Conservative party is not making promises on changes to the inheritance tax rates, bands or thresholds. We are not making uncosted, up-front tax cut promises on IHT or any other tax, because we fear that the public finances will have deteriorated so much by the time of the next general election that the nation will not be able to afford tax cuts. I know that that will disappoint those who want radical changes to, or the abolition of, IHT, but I hope that they recognise that economic stability is even more important than tax cuts and that a Government led by my right hon. Friend the Member for Witney (Mr. Cameron) will not risk that stability.
	Nevertheless, we are, of course, happy to examine the options for tax reform. In this area, as in any other, it is important that all parties seek to address the issues in a thoughtful and considered way. With that in mind, I have listened with care to the changes to inheritance tax proposed by the hon. Member for Falmouth and Camborne. Given the Liberal Democrats' commitment to increasing thresholds for IHT, it is bizarre to table an amendment that would delete a clause that increases those thresholds, which is what amendment No. 38 would do. Then again, the Liberal Democrats are not always known for their consistency.
	I also recognise, however, that there is some concern about the fact that the potentially exempt transfer system, which deals with lifetime gifts, gives the wealthy opportunities for reducing their IHT bill that are not open to many people on middle incomes whose major asset is the home in which they live. We are certainly open to considering reform of the PET rules, but we would approach that with caution. It is suggested that it would be possible to fund lifting the IHT threshold via an extension of the seven-year rule for potentially exempt transfers, but that would be risky.
	It is not clear how the change would work in practice, as we do not have a Liberal Democrat amendment to consider. Even more importantly, it would be difficult to predict what, if any, additional revenue would be raised simply by extending the relevant period. It would be impossible to guarantee that enough extra revenue would be raised to fund a significant increase in the threshold. An extension would have an impact on behaviour that would not be easy to predict. In many cases, extending the PET period might well simply prompt people to shift back their lifetime gifts, and the result would not be a huge additional revenue accruing to the Exchequer.
	I am also concerned about the practical constraints that we would have to address to ensure that such a reform worked. The further back the rules permitted the Revenue to go in looking at lifetime transfers, the more difficult it would be to prove that they occurred and to establish what happened. Moving to a 15-year period would make it difficult for HMRC to keep track of records sufficiently and to be able to enforce the change effectively. I understand that in the past the Treasury and HMRC have given some consideration to a change along the lines of that suggested by the hon. Member for Falmouth and Camborne, but have dropped it on the grounds that it would give rise to several administrative difficulties and costs and yield uncertain returns. If reform of the PET rules were used to fund changes or increases in thresholds, it would have to be borne in mind that any additional revenue would not accrue to the Exchequer for at least seven years, so any changes to the threshold that were to be funded by that method would have to be postponed as well.
	There is a broader point to make, and I value the opportunity that the Liberal Democrats have given us to consider these issues. It would be a mistake to tinker with just one aspect of how IHT works. If workable reform is to be seriously considered, we need to examine how the IHT rules work as a whole and consider all the options rather than just the PET regime in isolation. The Institute for Fiscal Studies is working on the Mirrlees report, which will include a study on IHT in its project to increase efficiency and fairness in the tax system.
	In view of the importance of considering a range of issues to do with how IHT works, I mention one further matter that I drew to hon. Members' attention in Committee, where it was dubbed "the sister problem". It relates to long-term cohabitees. Some categories of people cannot use the exemption that exists for transfers between husbands and wives or civil partners. Examples might include people who have lived with and cared for an elderly parent for many years, people with learning disabilities who might similarly have lived with parents over a long period in the same home, or two siblings sharing a home. I drew the Committee's attention to the case of my constituent, Ann James, who lives with her sister in a house that they have jointly owned for many years. She is very worried that the house will have to be sold should she die before her sister or vice versa. In assessing the options for IHT reform, the House should bear in mind the situation in which Miss James finds herself.
	This debate has given the House a useful opportunity to examine and highlight the anxiety and resentment that many people feel about the expansion in the scope of inheritance tax during the Chancellor's years at No. 11 Downing street. It has also given us a chance to explore important issues to do with the operation of the tax and the options for reform. The Opposition will continue to work for a wide-ranging reform of our tax system as a whole to make it fairer, simpler and more efficient, and will of course include in that process consideration of IHT.

Stephen Timms: I drew the Committee's attention to the fact that inheritance duties on large estates have existed in one form or another since 1694, when a tax of five shillings on all estates over £20 was introduced. The principle of such a tax is therefore well established in the United Kingdom. It yielded £3.6 billion last year and makes an important contribution to funding public services. I underline the Government's view that it is right and fair for such a contribution to come from the largest estates.
	The nil rate band is set at £300,000 for the current year and, as my right hon. Friend the Chancellor announced last year, that figure will rise faster than forecast inflation in the coming years. Clause 4 provides for a further above-inflation increase in the band to £350,000 in 2010-11.
	Like the hon. Member for Chipping Barnet (Mrs. Villiers), I was puzzled about the reason for the amendment, but the hon. Member for Falmouth and Camborne (Julia Goldsworthy) explained that it was tabled simply so that we could have a debate. However, if the Liberal Democrats have proposals on the matter—I note that the hon. Member for Twickenham (Dr. Cable) presented some ideas in a speech last week—the House should have an opportunity to discuss them.
	It is worth outlining the twofold effect of the nil rate band allowance. First, it ensures that every individual can leave a substantial sum to whomever they choose— including, for example, a sister—entirely free of inheritance tax. Secondly, it ensures that the tax is progressive because, for estates above the nil rate band, the effective rate of tax increases with the size of the estate.
	The number of estates that are liable for inheritance tax was mentioned. As has rightly been said, of approximately 600,000 estates a little under 6 per cent. attracted an inheritance tax liability in the past year. That means that the proportion of estates liable for inheritance tax is about 6 per cent. The remaining 94 per cent. paid no inheritance tax. That may come as a surprise to those who believe what they read in the newspapers, from which one gets the impression that the numbers are rather different.
	The hon. Member for Chipping Barnet mentioned the proportion 10 years ago, but if one goes back 20 years, to the height of Thatcherism, one finds that the proportion was 5 per cent. The proportion has therefore gone up and down over the years. The consequence of the changes that we have set out for the next few years is that the proportion will stay roughly at the current figure of approximately 6 per cent. of estates.
	In the last quarter of 2006, the mean house price in the UK was £199,000. The median price—the best measure of the "typical" property—was £175,000. The median prices for the south-east and London were £220,000 and £250,000 respectively. All those figures are within this year's nil rate band. Of course, when a home is owned with a mortgage, that debt will reduce the size of the estate on death The vast majority of property ownership falls well within the inheritance tax nil rate band. It is important to underline those points when the newspapers often give the impression that a large proportion of estates is becoming liable for inheritance tax. That is not the case.

Julia Goldsworthy: I am grateful to the Chief Secretary for the way in which he is dealing with the issue. Surely the biggest problem is that the number of very large estates that pay inheritance tax is declining. There is concern about the lack of a level playing field as well as fear at a lower level that people's estates will ultimately become liable for inheritance tax.

Stephen Timms: Again, if the hon. Lady has proposals that might address that, I would be happy to consider them. However, as she said earlier, we have introduced changes to deal with the matter and ensure that the wealthy pay their fair share of inheritance tax. We will not hesitate to take further steps if we consider them appropriate. I agree with the hon. Lady that fairness needs to be seen to be applied to these arrangements, as with every other part of the tax system.
	I want to underline a few more points that I think are appropriate, given the discussion that we have had. Not everyone is a home owner, and not every estate includes a house. In fact, housing makes up only 40 per cent. of the assets that are charged to inheritance tax, and it is important to acknowledge the other elements that make up the majority of such assets. Property values are a substantial contribution, however, and that is why we have had a period—and will have a further period—during which the nil rate threshold has been raised faster than the rate of inflation.
	Following the suggestion made by the hon. Member for Twickenham last week, the hon. Lady has suggested that the seven-year period could be extended, perhaps to 15 years. I suggest that the present system strikes the right balance between ensuring that the tax is not open to abuse and minimising the administrative burden on taxpayers and the operational costs involved. Taxing gifts made 20 or 25 years before death would involve people retaining a record of their finances over a long period. We need to strike the right balance between the complexity and difficulty of such record keeping and ensuring that we block loopholes where they arise. Assets gifted many years before death could be difficult to trace.
	I am grateful to the hon. Lady for explaining that she simply wanted to air this issue. I hope that the House will take the view that the balance we have set out in clause 4 and other announcements is the right one, and I am pleased that the hon. Lady has confirmed that she will not be pressing her amendment to a vote.

Julia Goldsworthy: I welcome the opportunity to discuss this issue, and we have had a constructive debate. The hon. Member for Chipping Barnet (Mrs. Villiers) was right to highlight the constraints on raising issues in the Finance Bill, in regard to which issues may be raised and whether we may discuss matters that might have an impact on revenue raising. I welcome the generally constructive tone of the debate.
	The hon. Lady was also right to say that, if such changes were introduced to lifetime gifts, we would not see an immediate impact on revenue and it would be difficult to judge the impact of such measures on behaviour. I refer her back to the comments made by the Minister last year, however, when we were discussing the inheritance tax treatment of trusts. The debate revolved around the fact that problems were being caused by individuals who were seeking to get round the inheritance tax rules but who did not want to give up control of their assets. That is the key point that I want to raise in talking about extending the time limit for lifetime gifts. Such an extension would still allow people to make a lifetime gift, but it would raise the issue of their having to give up full control of the asset at the time.
	I gave an example of a couple who lived with their parents, and the hon. Lady gave another example of people who might fall foul of the existing legislation. Part of the problem is that they possibly do not even realise that they have done so until it is too late to do anything about it. Similarly, I am sure that some people who are caring for elderly parents will be caught by the changes to pre-owned asset taxes. They might have had the house given to them, but a parent could then move back in when they became too old. These problems are likely to raise their head at difficult times in people's lives.
	The Minister talked about the above-inflation increase in the threshold for inheritance tax, but I must point out that house price inflation is very different from retail prices index inflation. There have been hot spots in which there have been massive increases. The hon. Lady mentioned the south-east where there are historical pressures, but parts of the south-west have also had massive house price increases. Combined with the fact that incomes are low there will be significant difficulty, in particular in some of the coastal villages in my part of the world where individuals know that they do not have a hope in hell of affording a property in the place where they were born and bred.
	There is widespread fear of inheritance tax, which may actually be greater among people who do not come within the tax's threshold at present. However, they fear the tax because they see that the threshold is not keeping pace with house price inflation, which in most cases is their main asset. The issue needs to be addressed, but it has not been, even by the increases that have been made so far. The increase in the Bill is welcome, but it is unlikely to be sufficient. Unless something is done, more and more people will continue to be caught by inheritance tax.
	I beg to ask leave to withdraw the amendment.
	 Amendment, by leave, withdrawn.

Clause 19
	 — 
	SDLT relief for new zero-carbon homes

Paul Goodman: I beg to move amendment No. 6, page 14, line 9, leave out sub-paragraph (a).

Mr. Deputy Speaker: With this it will be convenient to discuss the following:
	Amendment No. 7, page 14, line 35, at end insert—
	'(8) Regulations under section 58B shall expire one year after coming into force, but, subject to subsection (9) below, without prejudice to the making of further regulations under that section.
	(9) Further regulations under section 58B may not be made unless they contain a provision specifying that they expire one year after coming into force.'.
	Government amendment No. 1

Paul Goodman: First, we welcome Government amendment No. 1, on the regulations referred to in the clause. The Economic Secretary wrote about them to my hon. Friend the shadow Chief Secretary and the hon. Gentleman will doubtless address them in a moment.
	Our amendment No. 6 makes a relatively minor inquiry about a small part of the clause. It is not entirely clear why it is necessary to write it in the Bill that the regulations referred to in subsection 58C(2) may
	"refer to a scheme or process".
	I understand why it is necessary to include provisions in the regulations for the establishment of a "process of certification", in paragraph (b), and for the establishment of a process of "certifying energy efficiency" in paragraph (c). However, it is not clear why the fact that the regulations may refer to something needs to be on the face of the Bill, so we would be grateful for clarification on that point.
	By proposing that the regulations lapse after a year, amendment No. 7 allows us to make further inquiries about the scheme that the clause proposes. It is clear that the scheme will provide for a number of zero-carbon—or more properly speaking, energy efficient—homes, which is why we welcomed it in Committee. What is not clear is whether it will provide the number that the Government claim it will provide eventually. After hearing the Economic Secretary's reply to the debate in Committee, we were more doubtful about whether the scheme would provide that number than we had been before he stood up to speak. Anticipating his response that that reflects more on us than on him, I shall share with the House the causes of some of the difficulties encountered by the Committee.
	I shall not linger long over the mystery of the current number of energy-efficient homes. At column 139 of the Committee report, the Economic Secretary said that there were
	"few or no zero-carbon homes";
	but by column 141, when he had been asked to choose between two estimates, he conceded:
	"I do not know the answer". ——[Official Report, Finance Public Bill Committee, 15 May 2007; c. 139-41.]
	I accept that the point is relatively minor, although the Chief Secretary had previously told that supreme constitutional authority—Jeremy Paxman of "Newsnight"—that he thought there were "a couple of dozen". On Second Reading, he said:
	"a development of zero-carbon homes is going forward at Galleons Park in my constituency".—[ Official Report, 23 April 2007; Vol. 459, c. 661.]
	A reasonable observer might assume that "going forward" meant that planning permission had been granted, but the Economic Secretary confirmed on 15 May that it had not yet been granted, so those with an interest in London planning matters should note that when Ministers say a development is "going forward", they presumably mean—to quote the Economic Secretary—
	"The London Development Agency has earmarked the site."
	At any rate, the Economic Secretary was unambiguous about the target. He said:
	"we intend to get to the point where 200,000 such homes are built each year by 2016—that is the ambition."— ——[Official Report, Finance Public Bill Committee, 15 May 2007; c. 138-39.]
	We also know, because it was announced last May, and re-announced this May, that the Chancellor wishes five eco-towns to be built containing 100,000 energy-efficient—or if the Economic Secretary would prefer, zero-carbon—homes in total.
	That returns us to whether the Government are likely to achieve those goals. My hon. Friend the Member for Braintree (Mr. Newmark), who is in his place, announced a rough calculation in Committee. Assuming that each new energy-efficient house went on the market at £200,000, he argued, the Treasury would lose a total of £200 million in stamp duty if 100,000 of those houses were built. He then drew our attention to paragraph A2.10, on page 230 of the Red Book, which says:
	"The Exchequer cost is expected to rise to around £15 million by 2011-12."
	As he said, that suggests that by 2012 only 7,500 energy-efficient homes will have been built, and by his calculation it will take 13 years in total to build the Chancellor's 100,000 homes. My hon. Friend's figures may be rough, but on the basis of the figure that he dug out of the Red Book, it is hard to see how there can be an acceleration from about 7,500 in 2012 to 200,000 only four years later.

James Duddridge: Given my hon. Friend's comments, does he believe that the proposal is simply a publicity stunt? If the Government were serious about taking action, would they not concentrate on tax measures to increase energy efficiency in everybody's homes, and not simply go for headline-catching zero-carbon homes?

Paul Goodman: Certainly, the interest groups, whether house builders or green groups, have on the whole been pretty unenthusiastic in their responses to the proposals. Perhaps the Economic Secretary will be able to enlighten us on that point.
	In Committee, the Economic Secretary said:
	"He asked me what my forecast was for 2012. We do not have a forecast".
	He also said:
	"the build-up will not be linear, or like a straight line, but ... there will be a progressive acceleration over that period",
	and
	"we do not know what the pace of build-up will be."  ——[Official Report, Finance Public Bill Committee, 15 May 2007; c. 142 -43.]
	In summary, on the basis of the figure in the Red Book, the only reasonable conclusion to be drawn is that if we imagine the rate of building such homes as a line on a graph, the Treasury anticipates a slowly rising line until 2012, after which the line will dramatically and suddenly soar upwards until it almost ascends from the page.

John Redwood: The Government are vague in their legislation, as they point out that it may not relieve all the tax—they reserve the right only to reduce the amount of tax chargeable—and that the regulations will not continue after 2012. They are then left with the perverse situation that when the incentive is taken away, more such homes are to be built.

Paul Goodman: My right hon. Friend makes a vital point about the stability and certainty that any such scheme could reasonably be expected to provide and that those who might seek to invest in it would surely look for. I shall return to that in a moment.
	The Economic Secretary also said:
	"It may well be that the target will be reached faster than in that non-linear projection; it may well be that that happens more slowly." ——[Official Report, Finance Public Bill Committee, 15 May 2007; c. 142-43.]
	However, I have not risen to my feet today just to point to inconsistencies in statements by the Economic Secretary. The key point is the one that my right hon. Friend the Member for Wokingham (Mr. Redwood) has just raised. For the scheme to work, investors in energy-efficient or zero-carbon homes will look for stability, certainty and predictability as a basis for planning and investment. They will look for some sign that by 2012, when the relief is planned to expire, it will have taken the Government towards their proclaimed target of building 200,000 energy-efficient homes a year by 2016. If those investors or interest groups look at the small print in the Red Book, however, they will find that, on any reasonable calculation, only a relatively small number of such homes will have been built. That in turn would lead any reasonable inquirer to question whether the Government are serious about their proclaimed targets and whether they are serious about extending the relief after 2012 if the targets do not look like being met. On the basis of what we heard in Committee, it is up to the Economic Secretary to persuade the House that the Government have a coherent plan for reaching their target for the scheme and for the future of the relief.

John Redwood: My hon. Friend made a powerful case about the lacunae and missing elements in the Government's proposals. I look forward to hearing the Economic Secretary explain a little more about the extent of the relief and how he sees the profile of construction under the proposals.
	It is a great pity that such a good opportunity has been missed in the Government's modest amendment and the current text. Many of us believe that one of the most important things that we could do to encourage energy conservation and reduce carbon dioxide emissions is to give people more incentives to save energy in the home. It is a crucial area, where so much energy goes to waste. I am sure that the way to do to it is not to penalise, hit and tax people more, but to give them tax incentives. I admire the way in which the Government are proposing a tax incentive for the construction of new homes, but it is a pity that it is limited to new homes and cannot be extended to the many people who would like to make their home more fuel efficient, but do not wish to move and buy a new property.
	I hope that when the Economic Secretary thinks about how the Government might do more to promote zero-carbon homes among the general number of homes already constructed, he will also deal with the crucial question of what they mean by saying that the relief specified in the clause may be an exemption from the charge or it may be a reduction in the amount of the tax chargeable. As my hon. Friend said, it is terribly important that if the proposal is to work, there must be a strong and clear message from the Government about the exact nature of the exemption. That will require early and fuller statements from them about what a zero-carbon home is, how it can be measured, how a home can qualify, how much the tax relief will be and for how long it will be in place in practice. All those things are left in some doubt by the text as drafted.
	In the meantime, I will support my hon. Friend's proposals, because he is probing in the right way to get more certainty and sense into this strangely contentious area. I say strangely contentious because, as I understand it, all parties applaud the aim and wish more homes to be more fuel efficient. I assume that all parties are united in believing that tax incentives, rather than tax penalty and regulatory penalty, are a better way of doing that and more likely to succeed. I hope that the Economic Secretary will explain more of the detail and perhaps be more ambitious, because we have a great opportunity to do something very positive, which will also help to tackle the problems of fuel poverty and the difficulties experienced by the elderly and those on low incomes, who often live in the least fuel-efficient homes.

Julia Goldsworthy: The most difficult part of the proposal is that it is likely to increase demand rather than deal specifically with those who supply housing. We need incentives for the people who develop property as well as for those who want to purchase it. The incentive will have an indirect effect if we go straight to the demand side. A significant number of new properties will be built in my constituency. We already have difficulty convincing the developers that there is a demand for energy-efficient properties. Although the proposal provides an incentive, I am not sure how much it will do to convince property developers of the case. There is so much unmet demand that they could simply build unenvironmentally friendly houses and still have no problem selling them. That is the core of the difficulty for me.
	I welcome the Government amendment, because it means that we will be able to move on from the hypothetical and extended debate that we had in Committee, and are reliving today, to a more tangible one about what a zero-carbon property will be. I look forward to seeing the regulations, because—given my experience in my constituency—the Bill raises some key questions about what a zero-carbon property means. Does it mean zero-carbon in terms of running costs or the energy required to build the property in the first place?
	The Mount Pleasant ecopark just outside my constituency undertook to try to build workspace with as minimal an impact on site as possible. It was constructed with materials already on the site, instead of by bringing in cement and other building materials. That was a brilliant initiative and the resulting workspace has been taken up quickly, but it met with huge difficulties, including in securing the permissions and in developing the technologies to do it. For example, the walls of the property are made out of rammed earth from the site, and the result is a beautifully coloured surface, but some bizarre tests had to be carried out to prove that it was strong and durable enough. The tests included dropping a piece of the earth from shoulder height and if it broke into between three and seven pieces, it was appropriate for rammed earth construction. The expertise and techniques involved could bring huge benefits, but it is not clear whether the Minister intends to develop it that far. That will need to be made clear in regulations, because if the proposal is to be truly ambitious it should include not only the energy use of the building after it has been built, but minimising the impact that new build has on the environment, not least because some ambitious targets have been set for meeting the demand for homes.
	On the Opposition amendments, I agree that the regulations should include the method for claiming stamp duty relief, and I understand that that is the intent of amendment No. 6. I wonder whether the methods that have been mentioned will be affected by the Government's change in policy on home information packs. In Committee, it was pointed out that Cornwall is an objective 1 area, so there was an opportunity for new workspace to be part funded by that programme. Because of the huge demand, the opportunity was taken to set higher environmental standards. The problem was that there was no one within a 300-mile radius who was able to assess whether that workspace met those criteria. So we must not only set high aspirations but ensure that there is a way of delivering them. The obvious way would be through the home information pack process, but that has now been seriously undermined. We already know about the difficulties of finding the capacity to deliver that.
	Amendment No. 7 would introduce a sunset clause of one year. I wonder whether it might have been more practical to have a mechanism for reporting back, so that we could judge the effectiveness. Key questions remain, including how many people will benefit. We have had contradictory information from the Red Book and what Ministers have said. Fundamentally, the issue is that if we are serious about making homes more energy efficient, we have to tackle the existing housing stock, because the majority of it will still be standing in 50 years' time.
	Unless we tackle that issue, people will find it difficult to make their own individual effort to tackle climate change. There are some good practical examples, such as social housing stock in my constituency that has been retro-fitted with a ground source heat pump which has reduced the environmental impact of those properties and is also saving the people who live in them hundreds of pounds a year in heating bills. If we do not look at existing housing stock, what we can achieve through this mechanism will be severely constrained.

Brooks Newmark: I rise to speak briefly in support of amendment No. 7, which would introduce a requirement that the regulations on zero-carbon homes expire annually. We dealt with the proposal at some length in Committee, but I for one am not able to say that the debate caused the scales to fall from my eyes.
	The Economic Secretary is fond of berating Conservative Members for cynicism. I am not a cynic, but I hope that the proposals in the Bill are realistic. It is for that reason that I support the proposed requirement that the regulations be reviewed every year.
	In Committee, the Economic Secretary became a little discombobulated when he replied to a perfectly reasonable question from my hon. Friend the Member for Wycombe (Mr. Goodman) about such minor details as how many zero-carbon homes might be expected to make use of the tax relief on them. The Economic Secretary also had difficulty with the number of existing eco-homes. He said, staccato, that there were "few or no" zero-carbon homes today, then admitted that there were "none". Then he softened again, and said that there "may well be" none. I think that his final offer was that the true number was "low or zero". That is not a reassuring background to the introduction of the regulations.

Julia Goldsworthy: How can we assess how many zero-carbon homes exist when we do not know how they are defined?

Brooks Newmark: The hon. Lady's question makes my very point: the problem is that the Government do not create any definitions. They have grand schemes but do not define what we need to do or where we are going.
	As I said, the background to the regulations' introduction is not reassuring. We do not seem to know where we are now, let alone where we will be in 2012 or 2016. The Deputy Prime Minister once said, in an immortal phrase, that the green belt was a
	"Labour achievement and the Government intend to build on it."
	In a similar vein, the Economic Secretary accused Opposition Members of being
	"consistent in their opposition to taking forward concrete action on the environment"— ——[Official Report, Finance Public Bill Committee, 15 May 2007; c. 134.]
	Clearly, there was no irony there.
	My hon. Friend the Member for Tunbridge Wells (Greg Clark) has exposed how successful the Government have been at concreting over the environment. They are at the top of the class in that respect, but the foundations of their proposals on eco-homes are a little less concrete.
	Such homes involve technology that is new and untested. Either it does not yet exist, or it is experimental and somewhat uncommon. The choice depends largely on the mood of the Economic Secretary. We are justified in feeling a little suspicious of the Government's record on using taxation to effect behaviour change.
	I was concerned in Committee, and I remain concerned now, that the Government have proposed a tax relief that will chug along for several years without regular monitoring, and then simply stop. In addition, the relief is founded on the paradoxical assumption that it will contribute in some way to the Chancellor's thrice-announced 100,000 new eco-homes for a magical total of—and I do not get the maths here— 200,000 by 2016. According to the Red Book, those houses will come in at a cost of only £15 million by 2102. Either the incentive will be used widely, in which case it will cost more than the £15 million predicted by the Government, or it will not work and will need to be rethought.
	I pointed out in Committee, and it is worth reiterating now, that some £130 million has been spent on seven millennium communities, delivering homes to the "excellent" standard. I was amused to see—I made this point in Committee—that one of the seven communities, in east Manchester, was, in true new Labour fashion, named New Islington. It is a wonder that the Chancellor did not go the whole hog and call a street there Granita or New Granita.
	The fact remains that, after 10 years, the homes have not been delivered, so the idea that a large number of homes will be built in time to take advantage of clause 19 is optimistic—or indeed over-optimistic. The Economic Secretary talked of a non-linear projection for uptake, but was unable to provide figures for the uptake of eco-homes by the 2012 cut-off point for the regulations. Even using a curve rather than a straight line, it ought to be possible to extrapolate back from the aspiration of 200,000 eco-homes in 2016 and give us at least a ball-park figure for uptake by 2012—it could even be a Galleons Park figure. In the absence of that figure, my hon. Friends have proposed the only workable answer to the Treasury's remarkable opacity and confusion on eco-homes by requiring an annual review of the policy to see whether it is having the intended effect.
	The Economic Secretary offered the Committee a vague and open-ended commitment to review the regulations in or around 2012, if he is still around. That is not really a commitment at all, because it seems to depend on the prevailing circumstances. He also contends that this is a bold, innovative and radical policy, but let us hope that the Government have paid enough attention to his fourth adjective of choice and ensured that it is also coherent and that eco-homes will in future receive annual scrutiny.

Edward Balls: I hope that I will be able to give some reassurance while speaking about the Government amendment and responding to the Opposition amendments, and provide some more detail for the right hon. Member for Wokingham (Mr. Redwood), including detail on the definition of zero-carbon homes, which I hope will reassure the hon. Member for Falmouth and Camborne (Julia Goldsworthy).
	With the permission of the House, I do not intend to spend too much time repeating the debate in Committee about the costing and the number of zero-carbon homes. However, I want to set the record straight, because I have never been quoted as many times in the House as I have been quoted by the hon. Member for Wycombe (Mr. Goodman). This is exactly what I said:
	"we start from zero and will get to 200,000 in 2016, and...the build-up will not be linear, or like a straight line, but...there will be a progressive acceleration over that period. On the basis of that, from nought today to 200,000 a year by 2016, and on the basis of the stamp duty relief that we have set out today, we will produce a costing...On the basis of the costing, as set out in the Red Book, for the build-up that we have estimated or projected, the costing by 2012 will be around £15 million." ——[Official Report, Finance Public Bill Committee, 15 May 2007; c. 142.]
	That seems pretty clear.

Paul Goodman: The Economic Secretary has not at any point claimed that my hon. Friend the Member for Braintree (Mr. Newmark) was mistaken to suggest that if the expenditure by 2012 will be £15 million, that means that approximately 7,500 homes will have been built by then. If that is the case, it is hard to see how the Government can get up to 200,000 by 2016.

Edward Balls: I fear that the hon. Gentleman wants to repeat the debate that we had in Committee. I set out the position entirely clearly: there will be a non-linear, progressive, accelerating build-up over time on the basis of which we will get to a figure of 200,000 by 2016. The costing is correct for 2012. However, as the hon. Member for Braintree (Mr. Newmark) probably knows, given that he has studied these matters, things are dependent on the pace of the acceleration. As I said in Committee, the acceleration might be quick or slow, but we will still get to the same place in the end. This depends entirely on the definition, and, as the hon. Member for Falmouth and Camborne effectively pointed out to the hon. Member for Braintree, given that we are still consulting on the definition, it is hard to provide a completely detailed estimate at this stage. That was exactly why the projection that was set out in Committee was made in such a way. I do not think that we will make any more progress on the matter. The position is very clear.

Brooks Newmark: rose—

Edward Balls: If the hon. Gentleman really wants us to repeat our debate in Committee, I am happy to give way.

Brooks Newmark: I remain confused. The Economic Secretary made the strong statement that the estimate for 2012 is £15 million. Perhaps by using a linear accelerator, he will magically get from the figure for 2012 to that for 2016. However, he has admitted that he does not have a definition. How can a projection be made when there is no definition of the proposal that the Government are setting out?

Edward Balls: I am happy to dwell on this point if hon. Members really want me to do so. There are two fixed points. We start from zero. Under any definition, that figure is zero, or thereabouts —[ Laughter. ] Well, as I said in Committee, there might be one or two developments, and a planning inquiry on a zero-carbon home estate is ongoing. I was asked whether the planning permission for that estate was moving forward—it is. The opposite of going forward is going backwards. As I am sure that the hon. Member for Grantham and Stamford (Mr. Davies) would agree, the Government believe in going forward, not backwards, which is exactly what we are doing on the planning inquiry.
	As I said, we start from zero. By 2016, all homes will be zero-carbon homes—[Hon. Members: "New homes."] Yes, all new homes. I have been tempted by the right hon. Member for Wokingham to go outside the scope of the amendments by discussing energy saving in existing homes, but I am sure that you would rule me out of order if I did so, Mr. Deputy Speaker.
	We start from zero and we will get to 200,000 new homes. Clearly, we will get to 200,000 quickly or slowly depending on the pace of the acceleration. The sum of £15 million is the cost for 2012, but that depends on the pace of acceleration. The curve of the line of acceleration might vary, but that has nothing to do with the definition of zero-carbon homes. I thought that the hon. Member for Falmouth and Camborne was right about that.

Stewart Hosie: rose—

Edward Balls: I am anxious to get on to the substance of the amendments because I have some detail to give the House. However, I am told that it is important that I take as many interventions as possible, so I give way to the hon. Gentleman.

Stewart Hosie: I quite enjoyed this debate in Committee because I did not take part in it. No design exists for a carbon-neutral home and no planning permission has yet been granted anywhere for such homes. Given that the time scales for developers and house builders, especially those relating to the release of land banks, are set for some time in councils that have not even considered a zero-carbon planning application, is the Minister convinced that sufficient money has been set aside and, more importantly, that the time scales are such that any of the £15 million will be used to kick-start his trajectory towards 200,000 such homes by 2016?

Edward Balls: I think that I will be able to answer the hon. Gentleman's serious question when I finally begin my prepared speech. That will depend on the detailed steps that we can take between now and 2016 to move the policy forward. I will be able to reassure him.
	I point out to the hon. Gentleman, however, that later on the page of  Hansard I quoted a moment ago, when I said that we will move
	"from nought today to 200,000 a year by 2016, and...will produce a costing."
	it is recorded that he asked,
	"Will the Minister give way?"
	to which I replied, "In a second." I then continued my remarks, saying
	"On that basis, costing by 2012 will be around £15 million a year." ——[Official Report, Finance Public Bill Committee, 15 May 2007; c. 142.]
	The hon. Gentleman must have been about to intervene. Unfortunately, I have only one page of  Hansard, so I cannot tell him what he said subsequently, although I am sure that he made, as always, a good and astute intervention. He may have forgotten that moment, but he was undoubtedly an important player in the Committee debate.

Mark Tami: If we are to meet the target of 200,000 new homes, what are my hon. Friend's views on the Conservatives' opposition to building, full stop? How on earth are we to reach that target? They level accusations at us, saying that we will not meet the target, yet in their council areas the Conservatives always oppose new building.

Edward Balls: My hon. Friend makes an important point, which is indicative of a wider problem facing Conservative Members. They know that to be part of the mainstream centre ground of British politics, it is important, in backing zero-carbon homes and in other areas, to stand up for the interests of hard-working families who find it increasingly difficult to access the housing ladder because of rising house prices, which are the result of the fact that, for some decades, we have not built enough houses to keep pace with demand. They know that they ought to be there, representing the mainstream hard-working families of our country, but at the same time their leader knows that among not only party members, but Back and Front-Bench Members, there is a continuing desire—expressed on their websites and elsewhere—to oppose house building in their local areas.

Paul Goodman: Can the Economic Secretary confirm for the record that no Government Minister has ever publicly opposed a planning application in his or her constituency?

Edward Balls: I certainly cannot claim that there has been no such occurrence. The interesting thing is how consistent the Conservatives are in their opposition to new house building. Their leader's problem is that, to unite his party, he has to do so around a position of opposition to new housing developments, which is quite contrary to the views and interests of the mainstream of British people. One could make exactly the same argument on Europe, grammar schools, tax cuts—

Mr. Deputy Speaker: Order. The debate was broadening rather, so I was poised to intervene, and then the Economic Secretary went way off to such an extent that I felt that I should do so. Whatever time constraints he has been set, I think that we should come back to the terms of the amendment.

Edward Balls: I am grateful for your guidance, Mr. Deputy Speaker. A few moments ago, I suggested that you would not indulge me in responding to the desire of the right hon. Member for Wokingham to draw me into discussing whether we should have tax reliefs or energy-saving material support for existing homes rather than new homes, because the clause is indeed about stamp duty relief on new homes. Having suggested that that might have been out of order as a way of avoiding being drawn into that area, I accept that talking about grammar schools, Europe and tax cuts is completely out of order.

Brooks Newmark: I appreciate the Economic Secretary's comments on a housing shortage, but the Government have had 10 years to provide more low-cost housing. Is it not therefore a failing of the Government that we have a shortage? Is he proposing that we should be building low-carbon homes in people's backyards? Is that his solution—more building in people's back gardens?

Edward Balls: Unfortunately, I do not have with me the quotes to demonstrate that the Government have been trying to raise the number of new homes built, year by year—and indeed we have been succeeding. Over time, we aim to make more of those homes zero-carbon, through stamp duty relief. That has been difficult to do because of the continuing opposition of Conservative Front Benchers and Conservative councils across the country. It is that political opposition to new house building that is holding back the productivity of our economy, and making life much more difficult for hard-working families.

Theresa Villiers: Is it not true that the last Conservative Government built houses at a faster rate than the present Government, and is it not scandalous that levels of home ownership are actually falling under this Government?

Edward Balls: Two million more people have mortgages today than did in 1997, and it was the Conservative Government who led to hundreds of thousands of people being in negative equity, and to very high interest rates. While we have been in government, the Conservatives have progressively opposed the housing developments that are needed to deliver prosperity and social justice.

Theresa Villiers: rose—

Edward Balls: Mr. Deputy Speaker, I fear that I am being lured down a path that may cause you some displeasure, but I have been seeking to answer hon. Members' questions. I am inclined to take an intervention from the hon. Member for Chipping Barnet (Mrs. Villiers), unless you rule against it.

Mr. Deputy Speaker: Order. Perhaps the hon. Member for Chipping Barnet (Mrs Villiers) will hear my ruling before she decides whether to press her point. Just when I thought that I had the Economic Secretary back in the paddock, the hon. Member for Braintree (Mr. Newmark) and the hon. Member for Chipping Barnet have managed to break down the fences, and now he is loose again. This debate is veering way off course, and I appeal to both the Minister and Opposition Members to try to get back to the specific point of the amendment.

Edward Balls: With your permission, then, Mr. Deputy Speaker, I will happily return to clause 19.

John Redwood: I was speaking to amendment No. 7, the purport of which is to provide that regulations under the clause will be in place for only a year. One of the reasons why I am minded to support the amendment is that I think that we need a bigger and better scheme, and that may need a combination of primary and secondary legislation. I am quite sure that the House would be interested to know why the scheme that the Minister is defending is so narrow. That is the burden of the argument that we are having today.

Edward Balls: I did say that I would respond in detail to the contributions of Opposition Members, including the right hon. Member for Wokingham, and I hope to do so in a way that provides further substance and detail on the consultation that we are taking forward on the definitions. I hope that by the time I address amendment No. 7, I will have set out the procedures that we intend to take. They will give the right hon. Gentleman and other Opposition Members greater reassurance, and will allow us better to strike the balance between giving the industry some planning certainty on the one hand—that is very important—and making sure that we keep a close grip on that policy area and review our progress as we go along on the other. I hope that when I have made more progress, the right hon. Gentleman will find that I have addressed his point. If he does not think that I have done so, I will, obviously, take a further intervention from him.
	Clause 19—he said, turning to his speaking notes after some time—deals with the exemption from stamp duty land tax for new zero-carbon homes announced by my right hon. Friend the Chancellor of the Exchequer in his pre-Budget report and his Budget statements. The clause amends the stamp duty land tax legislation in the Finance Act 2003 by inserting new sections that provide for a relief or exemption for the first sale of new zero-carbon homes. I am sure that anyone following this debate will be entirely clear that that is what we have been discussing for the past 15 minutes. The new sections enable the Government to make regulations that define new zero-carbon homes, quantify the amount of relief or exemption, and deal with administrative matters.
	The relief is an attractive incentive to those who wish to build and live in greener homes, as it will allow a relief of up to £15,000 on stamp duty land tax; the figure will depend on the sale price of the house. The regulations will cease to have effect at the end of the five-year time limit, on 30 September 2012, unless a decision is taken to extend that period. I will come back to that point later. The regulations were made available in draft before the Public Bill Committee debate on 22 May, as the hon. Member for Wycombe said. In that debate, I said that it was an important part of the Bill and that the regulating power that we were making was significant, too. It was important that we consulted properly. We have asked for comments on the draft regulations from more than 200 different bodies with an interest in greener homes. The consultation closes at the end of July and we will consider the responses before finalising the regulations and debating them in the House. The hon. Member for Wycombe gave the impression that the response from external stakeholders was not positive, but Mr. Paul King, the chief executive officer of the UK Green Building Council and campaigns director for WWF, referred to the codes for building regulations—I shall come on to them in a moment—as
	"a big step in the right direction".
	He said:
	"There are developers now with zero-carbon developments in the pipeline. To get from the pioneers to all developers within 10 years is realistic."
	Mr. Zoltan Zavody, strategy manager of the Energy Saving Trust, said:
	"Suddenly, the renewables industry can invest in capacity. It knows that there will be a requirement to use its products."
	There have therefore been positive comments about the measure.
	It is right, given the novelty of the regulations, that we should initially deal with them under the affirmative rather than the negative procedure as originally planned, to ensure that the House has a further opportunity to scrutinise their details before they come into effect. In Committee, I said that I would consult the business managers to see whether it was possible both to undertake proper consultation and to use the affirmative procedure. Such is the interest in this policy area that a debate on the affirmative resolution is appropriate. I am therefore pleased to tell the House that the amendment I have tabled to clause 19 provides for the first set of regulations to be made, subject to affirmative resolution by the House of Commons. We believe that that is the right approach but, because of the importance of consultation and the short window of parliamentary time between now and 1 October, we will not be able to bring the regulations into force on 1 October. That is simply a consequence of the parliamentary timetable. On present plans, we intend to lay the affirmative instrument as soon as Parliament returns from the summer recess, and once our consultation is concluded. Our objective remains to ensure that the regulations are approved by the House at the earliest opportunity allowed by the parliamentary timetable.
	I have looked at the matter in detail, because I wanted to ensure that we did not hold up in any way the forward movement towards zero-carbon homes, which I am sure everyone wants. When we introduce those regulations as part of the affirmative procedure, we will provide for the measure to be made retrospective to 1 October 2007. That means that no one who completes a transaction on a new zero-carbon home between 1 October 2007 and the autumn date on which the regulations are finally agreed by the House will be deprived of the opportunity to claim relief from stamp duty land tax. After the regulations have come into force, individuals who wish to claim relief for transactions made in the period between 1 October and the date on which the regulations come into force can do so simply by amending their stamp duty land tax return and Her Majesty's Revenue and Customs will repay any overpaid tax. If, by October or November, new zero-carbon homes are still being built, that will not be too onerous a task for HMRC, and we hope to make progress. However, if new homes are in that situation, we have made provision to ensure that no one suffers a setback as a result of the slightly longer timetable required to ensure that the affirmative resolution procedure is used properly after the consultation.
	We are determined to get the regulations right through consultation and parliamentary debate. It is important, too, that the regulations are set within the wider context of co-ordinated action across Government by the Minister for Housing and Planning and the Chancellor of the Exchequer to achieve zero-carbon homes. Zero-carbon homes, as we set out in the pre-Budget report and the Budget, are important if we are to achieve our target to reduce overall carbon emissions in 1990 by 60 per cent by 2050. Over 25 per cent. of all carbon emissions in the UK result from energy use in the home. By 2050, about one third of homes will have been built after 2007. If we can ensure that as many as possible of those homes—and our goal is that it should be all of them—are zero carbon and make no net carbon emissions over the course of a year, that will make a significant contribution to the 2050 target.
	In recent years, we have used building regulations to improve the energy efficiency of new homes. Changes to building regulations in 2006 have achieved a 40 per cent. improvement compared with pre-2002 standards, and a 70 per cent. improvement compared with pre-1990 standards, in the energy efficiency of new homes. The importance of the regulatory context will become clear in a moment. We want to go further and use regulations to require new-build houses to meet a zero-carbon standard from 2016. We need to give the house building industry time to adjust to the changes needed in technologies and methods, which is why we have announced the target date in advance and why my right hon. Friend the Secretary of State for Communities and Local Government launched a consultation on changes to building regulations before Christmas, and set out the road map to the zero-carbon standard. The consultation has now ended, and the Government will respond to it in the summer, along with our consultation on stamp duty land tax.

Julia Goldsworthy: The Minister has said a great deal about what Government Departments can do to help to raise standards. This year, immediately after Second Reading of the Sustainable Communities Bill, the hon. Member for Gower (Mr. Caton) sought to introduce a private Member's Bill that would allow local government to set higher environmental standards, but it was talked out by the Government. Does the Minister agree that if the Government genuinely wish to encourage lower carbon emissions from housing they should empower local authorities to set even higher standards where necessary?

Edward Balls: I certainly think that we need to work closely with local government to meet those objectives, so I agree with the hon. Lady. I fear that if my answer to her is too detailed I will stray beyond the scope of the clause, but I very much accept the tenor of her comments.
	The hon. Lady will agree that building regulations are not all that is needed to meet the objective. We need to ensure, too, that the planning system helps to encourage lower carbon emissions and does not present a barrier to the development of new homes—that is a matter for local government. We have therefore consulted on a draft planning policy statement on climate change, and we will publish the final document later this year. The consultation on building regulations sets out interim steps, but we have taken other initiatives as well. We have, for example, suggested that improvements be made to building regulations in 2010 and 2013 before going to zero- carbon status in 2016. We also launched the code for sustainable homes as a voluntary standard in England. It allocates a star rating from 1 to 6 to new homes, thus assessing their overall sustainability performance, and it sets out our aspirations for new-build housing. We have proposed, too, making rating against the code mandatory from April 2008. Code level 6 represents a zero-carbon standard, and I shall explain why that is relevant to our debate.
	The new stamp duty land tax exemption is an important building block, and it completes our strategy. Our long-term goal is to achieve a zero-carbon standard in all new homes by 2016, but with technology in that area moving so quickly, it is difficult and undesirable for anyone to try to predict precisely what standard we will have to meet in 2016. We do not know what technological developments lie ahead. On the other hand, we want early action to kick-start the market—in Committee, we had rather a long debate about the definition of "kick-start"—so the stamp duty land tax exemption will sit alongside code level 6 as an incentive.
	Following our consultation and discussions in Government, I can set out today our view that it is important that these two initiatives, code level 6 and the definition of zero-carbon homes in our stamp duty land tax regulations, are aligned so that we can adopt the same definition of zero-carbon homes. I therefore propose, following consultation with ministerial colleagues, and subject to the outcome of the consultation and the debate that I promised Parliament later this year, that we will aim to align the stamp duty land tax exemption definition with the code level 6 definition. Starting with a common definition will maximise certainty for house builders in the crucial early stages.
	We are still consulting on these issues, but I can give hon. Members two examples of what the alignment may mean in practice. First, following the publication of our draft regulations, we are now inclining to the view that both the code and the stamp duty land tax exemption should include the provision that, initially, a zero-carbon home for stamp duty land tax purposes could be connected to the gas mains, provided that there was adequate offsetting for the gas burned through renewables provision. Similarly, we know that it is sometimes more efficient for renewable energy to be provided on a development-wide basis, rather than house by house. This is another area where we want to adopt the same approach in both instruments.
	In both examples, without pre-empting the consultation that is under way, we will seek to achieve that in the regulations that we intend to put before the House under the affirmative resolution procedure.

Julia Goldsworthy: The Economic Secretary mentioned that properties connected to the gas mains may be eligible to qualify as a zero-carbon home. There will obviously be significant regional diversity. Most of Cornwall, for example, does not have access to gas mains. Will areas that do not have the benefit of such infrastructure be disadvantaged by that approach?

Edward Balls: On one reading of the draft regulations that we published, those parts of the country that do have gas mains might have been excluded. The indication that I am giving today is that we are minded to allow areas with a gas main to benefit, potentially, from the stamp duty land tax, provided that there is adequate offsetting for the gas burned through renewables provision. Clearly, in areas that do not have a gas main, the issue does not arise. That is one of two areas in which we are seeking to be clearer in regulations in order that we can align code level 6 with stamp duty land tax regulations when we publish them.
	Of course, over time we will need the flexibility to change the definitions. Because it is a generous tax relief, we need, first, to be sure that the SDLT exemption is working as intended—that is, genuinely incentivising innovation through the early build-up of zero-carbon homes on the road to 2016. Secondly, as hon. Members would expect in an area of tax policy, we need to ensure that we take the right steps to tackle any potential tax avoidance. Following consultation, I am therefore committing the Treasury today to conducting an interim review of the SDLT definition of a zero-carbon home halfway through its five-year life for the express purpose of testing the exemption against those two criteria.
	Furthermore, as I said in Committee, we will carry out before the end of the five-year time limit a full review to assess whether or not we should extend the tax relief, and we will
	"give a clear, public signal of our future intentions well in advance" ——[Official Report, Finance Public Bill Committee, 15 May 2007; c. 137.]
	of the five years. So there will be the review in advance of the five-year end point to see whether, in order to achieve the incentivisation that we seek, we will need to extend the SDLT provision after five years, and there will also be a review after two and a half years to see whether the definitions continue to be aligned, whether we are achieving our objectives, and whether we need to tighten or loosen the definition.
	By announcing that intention today, we are giving the industry and home owners fair warning that we are setting a high standard which we wish to see new houses reach in return for the tax relief, but that we are willing for the moment to offer flexibility in the definition to kick-start the market, particularly in the areas that I highlighted a moment ago. We need at all times to balance our requirements for a robust tax definition that delivers value for money against the need for an achievable standard in the short and medium term to incentivise the development of the market. We believe that the process that we are setting out today, the consultation in which we are engaged and the affirmative resolution procedure will allow us to do so, and to align code level 6 and our regulations to give clarity and certainty to the market.
	Having set out our overall strategy, what we are doing to implement it and what additional steps I can announce today as part of the consultation, I shall deal with the amendments to clause 19 proposed by the Opposition. Amendment No. 6 proposes the deletion of subsection (2)(a). The subsection provides that the regulations may
	"Refer to a scheme or process established by or for the purposes of an enactment about building"
	in relation to the evidence that a building satisfies the definition of a zero-carbon home for the purposes of the relief.
	The amendment would remove a paragraph which allows the regulations to refer to schemes or processes established for the purposes of another enactment. In particular, it would mean that evidence in the form of a certificate or a letter relating to the zero-carbon home criteria but issued by an assessor accredited for the purposes of the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 could not be adduced as evidence that a house qualifies for relief from stamp duty land tax.
	The assessors in question—SAP, or standard assessment procedure, energy assessors—are the only class of people who can produce energy performance certificates for newly built homes. They are a different group of energy assessors from the domestic energy assessors who are being trained to produce energy performance certificates for inclusion in home information packs. The new home assessors have been up and running for some time.
	If we did not allow taxpayers to adduce such evidence, we would lose much of the evidence base that would be used to evaluate whether a home was zero carbon or not. That is particularly important because the decision on stamp duty is made at the moment of purchase, whereas we are trying to incentivise homes to be zero carbon throughout their lifetime. If we could not use the evidence produced by those assessors, we would have to use other, perhaps less reliable, forms of evidence to evaluate a home's entitlement to the relief.
	If HMRC had to develop a new accreditation system, that would be tantamount to reinventing the wheel. Such an approach makes no sense. It would mean increased costs for builders as they would face more regulatory burdens to build zero-carbon homes, because they would face one set of mandatory tests for the purposes of the energy performance of buildings regulations and another to satisfy HM Revenue and Customs that the relief is justified.
	In designing the relief we have tried to build on existing structures, and I do not see how the amendment would help. We are trying to encourage the building of zero-carbon homes by developers, not to make them go though additional tests. When developing proposals for the relief, we thought that builders should be able to draw on the use of existing material from other legislation to adduce the home's entitlement to the relief from stamp duty land tax. Energy performance certificates were initiated in January 2003 and it will be mandatory for an EPC to be issued when a new building, including a new home, is built, sold or rented out.
	The criteria for zero-carbon homes draw on the same methods of establishing energy performance of buildings as used for EPCs, although the criteria for zero-carbon homes go beyond the assessment required for EPCs. The advantage of using the energy performance certificate system is that it already exists as a framework to assess the energy performance of buildings. To set up another system to deliver similar objectives and assess deliberately similar tests would be inefficient.
	Amendment No. 7 would insert two new paragraphs in the clause. The first new paragraph adds a requirement that the regulations made shall expire one year after coming into force. Further regulations permitting the relief would have to be laid. The second new paragraph—paragraph (9)—states:
	"Further regulations under section 58B may not be made unless they contain a provision specifying that they expire one year after coming into force."
	The amendment would limit the lifetime of any such set of regulations to just one year after their coming into force, after which either the relief would not be available or new regulations would need to be made annually affording the relief. As a consequence, parliamentary and Government time would have to be deployed every year in renewing the regulations on an annual basis between now and 2012.
	Obviously, like most hon. Members, I recognise that the regulations that underpin this relief will change over time. That is inevitable as the zero-carbon homes industry is in its infancy and technological developments make change inevitable. We have made allowances in the clause to amend the regulations where such technical changes are needed. Indeed, I have today announced a two-and-a-half-year review to ensure that we are achieving our objectives of alignment and progress towards our goal. There is a considerable difference between having the flexibility to make changes to regulation if required and what is being proposed in amendment No. 7, which is essentially that, every year, the relief should be allowed to run only on a year-by-year basis, depending on renewal by the House. Our fear is that that would send a negative signal. Imposing a one-year time limit and having to renew the regulations each year would not provide developers with the certainty that they need in order to plan the development of zero-carbon homes. Given the length of time needed from land acquisition to the sale of new homes, such an amendment could restrict house builders' opportunity to take full advantage of the tax exemption. In our view, the amendment would create uncertainty for homebuyers and also home builders, and significantly reduce their ability to plan ahead financially with a view to building a zero-carbon home.

Stewart Hosie: I did in fact take part in the debate in Committee, where I asked a question about definition and validity of the tax incentives. When the Economic Secretary considered the matter, he said:
	"We may need to make the measure more generous, or we may find when we look in advance of 2012 that we were more generous that we needed to be and that there is a lot of dead-weight cost."— [Official Report, Finance Public Bill Committee, 15 May 2007; c. 143.]
	That brings me to the very point that we are discussing. He is speaking about alignment in relation to the planning system, building regulations, stamp duty, definitions and all sorts of other issues. He has offered an interim review. Given that there is a requirement in the Government's mind that all the measures should be aligned across legislatures and in local government, would it not make sense to have a more frequent annual review that the industry, and developers and builders in particular, know about in advance, to ensure that the alignment continues and that he gets the linear trajectory that he expects?

Edward Balls: The hon. Gentleman is right that we need to strike this balance carefully. The two areas in which I have clarified our position in our desire to achieve alignment—gas mains and multiple homes—indeed involve ways in which we can offer the prospect, following consultation, of more generous relief through a more generous interpretation of zero-carbon homes in the early years when we produce the regulations in the autumn. We are making those concessions, but at the same time, we also have to ensure that we strike the right balance and do not open the door to substantial rebadging and tax avoidance relating to homes that do not really meet our zero-carbon objectives. We are trying to get a sensible and aligned, and in the early years generous, definition. Our two-and-a-half-year review is intended precisely to give us the opportunity to assess whether we are making that progress.
	As I said, however, to review year by year and particularly not to give any certainty that the regulations would continue after one year unless the House acts again, as the amendment proposes, would run the risk of holding back the market and making it too easy for Governments not to deliver on our commitment. We want to kick-start the market. Our fear is that the amendment would hamper the market's ability to kick-start, because it would be too easy to renege on an annual basis if Ministers of either party so desired.
	I should like to return to our debates in Committee and quote the contributions of some Opposition Members, who unfortunately are not all present. The hon. Member for Windsor (Adam Afriyie) said: "From my business background"—this was one of the numerous occasions on which he cited his business background—
	"and given how long it takes to build properties, it seems to me that putting a short time limit on the tax relief"—
	at that point, he meant five years—
	"sends a signal that the Government are uncertain whether the relief will continue. What confidence does that inspire in builders, who have to invest hundreds of millions of pounds developing new homes? It sends no confidence signal at all."
	I set out to the hon. Gentleman why I thought a five-year limit was a sensible point at which to assess the future of the relief. In the same debate, the hon. Member for Braintree said:
	"I am concerned that from the outset there is a limited window of opportunity—five years—attached to the scheme, however. As a business man, I point out that the technology required to approach the standard of a true zero-carbon home will require significant capital investment from developers to reduce the high unit cost of microgeneration technology." ——[Official Report, Finance Public Bill Committee, 15 May 2007; c. 126-137.]
	It is because we want to make sure that we achieve the incentive that we have not only set out a five-year relief, but said that well in advance of five years we will make a public decision as to whether the relief will continue.
	I think that we are hearing a rather confused message. The amendment tabled by Opposition Front Benchers proposes not an extension of the five-year time limit, but annual renewal of the regulations, while two Opposition Back Benchers suggested that five years was not long enough. I genuinely value the practical experience brought to the Committee by former and, as in the case of the hon. Member for Braintree, current business men when designing the relief, I do not think that they would agree that moving to an annual basis for making the decisions would be a sensible way to proceed.
	Let me quote Stewart Baseley, the executive chairman of the Home Builders Federation, another business man:
	"We welcome this package of measures in setting both the goal and direction for achieving more and greener homes. Progress will be achieved most effectively through a framework in which Government sets clear objectives, industry is given the space to deliver and consumers are on board."
	That is what we are trying to achieve with these measures. The amendments would not only add to bureaucracy, but by moving to an annual basis for making the decisions, they would have the opposite effect to that intended by hon. Members on both sides of the House and the Government, and also the Home Builders Federation.
	In conclusion, I hope that the House will agree that the Government amendment will add value to the process of developing better legislation and fulfil the commitment that I made in Committee to do everything I could to ensure that we had an affirmative procedure on this matter. I hope that I have given reassurance to the right hon. Member for Wokingham that we are making progress on the detail in order to achieve, within the scope of the clause, the objectives that we have set out. I hope also that we have satisfied the hon. Member for Falmouth and Camborne that we are making tangible progress in providing clarity in definitions, and that we have seen off some of what I think she called the cynicism that we heard in the Committee, which is not well founded in this particular policy area.
	I hope that we have persuaded hon. Members that presentation is not what this is about. I am sure that my colleague on the Labour Benches, my new hon. Friend the Member for Grantham and Stamford, would agree that this is an area where substance not spin is the way forward. I therefore urge the House to deliver our 2016 zero-carbon home objective, to support the Government amendment and to reject both the amendments tabled by the Opposition.

Paul Goodman: I want to begin by referring back to an observation made by the hon. Member for Falmouth and Camborne (Julia Goldsworthy), who pointed out today, as she did in Committee, that there is not only uncertainty about this demand-side measure, but nothing much on the supply side to ensure that we reach the figure of 200,000 homes by 2016. That observation set the context for this debate, because there is doubt whether the Government will reach that figure, which is what we wanted to explore today.
	That brings me to the Economic Secretary, who commendably spoke at some length—I thought that I heard him say, "Was I long enough?" although I cannot imagine why he would say that. I cannot possibly complain that he failed to address the detail. As this might be the last occasion when I shadow him in a debate—

Mark Tami: Are you joining?

Paul Goodman: I would not advise the hon. Gentleman to intervene, because the last time he did so he succeeded in broadening the debate so far that the Deputy Speaker had to get to his feet. We cannot possibly have that now, can we?
	Whatever happens to the Economic Secretary, we know that he is a perceptive man. He dealt with today's debate calmly and with a smile on his face, which suggested that he knows that the Government were rumbled in Committee. He was able today—we will accept this as a graceful form of retreat—to announce that there will be a two-and-a-half-year review, which we had not heard before and which he was good enough to share with us. He also provided some welcome details about the introduction of the regulations.
	One accusation that is occasionally thrown at us is that we do not want the measure to succeed. Although we are still sceptical whether the 200,000 figure will be reached, and although the Economy Secretary did not answer the point originally raised by my hon. Friend the cynical and sceptical Member for Braintree (Mr. Newmark)— [ Interruption. ]. If my hon. Friend is cynical about the Government's endeavours, he is entirely right to be so. We do not want to pursue any proposal that is likely to ensure that the scheme runs into difficulty. We accept that it will produce some zero-carbon homes, although we do not know how many any more than the Economic Secretary knows how many there are currently. For that reason, we will not seek to press the amendment to a vote. I beg to ask leave to withdraw the amendment.
	 Amendment, by leave, withdrawn.
	 Amendment made: No. 1, page 14, line 37, at end insert—
	'"(5) The first set of regulations under section 58B (new zero-carbon homes) may not be made unless a draft has been laid before and approved by resolution of the House of Commons.'.— [Ed Balls.]

Clause 20
	 — 
	Income tax exemption for domestic microgeneration

Paul Goodman: I beg to move amendment No. 3, page 15, line 10, leave out sub-paragraph (b).

Madam Deputy Speaker: With this it will be convenient to discuss the following amendments:
	No. 34, page 15, line 17, at end insert—
	'(3) The Treasury shall prepare and lay before the House of Commons annually a report on the effectiveness of the tax relief mentioned in subsection (1) in achieving its objectives, with particular reference to the change in the amount of electricity generated by microgeneration systems.'.
	No. 4, page 15, line 29, clause 21, leave out sub-paragraph (c).
	No. 35, page 15, line 20, leave out clause 21.
	No. 5, page 16, line 5, clause 21, leave out sub-paragraph (c).
	No. 36, page 16, line 19, clause 21, at end insert—
	'(5) The Treasury shall prepare and lay before the House of Commons annually a report on the effectiveness of the tax relief mentioned in subsections (1) and (2) in achieving its objectives, with particular reference to the change in the number of domestic microgeneration schemes.'.

Paul Goodman: In the course of saying farewell to the Economic Secretary before he is elevated onwards and upwards to higher things, I forgot to mention that this is the Chancellor's last full day. I intend principally to discuss amendments Nos. 34 and 36, and I shall begin by marking that point.
	This afternoon gives the Chancellor a final chance to act on the emerging consensus in this House that the Treasury should take a clear departmental lead on the environment in relation to microgeneration and energy efficiency. Hon. Members will recall that at this stage of last year's Finance Bill, the hon. Member for Nottingham, South (Alan Simpson), who is in his place, tabled an amendment to make the Treasury issue an annual report on fiscal measures to assist with microgeneration, energy efficiency and small-scale energy generation. Hon. Members will also recall that we supported that amendment in the Lobby along with the Liberal Democrats when it was pressed to a vote. We tabled the same amendment in this year's Committee of the whole House, when we were supported by the Liberal Democrats. The hon. Member for Falmouth and Camborne (Julia Goldsworthy) agreed with me in the closing moments of that debate that it was worth returning to the matter, and amendments Nos. 34 and 36 are that return to the matter.
	Following a slight adjustment, the amendments propose that the Treasury report annually to the Commons on the effectiveness of the tax reliefs in clauses 20 and 21. In the debate in the Committee of the whole House, which was somewhat compressed, I tried to sum up the emerging consensus on microgeneration in a sentence:
	"The Red Book only takes us so far."—[ Official Report, 1 May 2007; Vol. 459, c. 1477.]
	I said that the information on page 177 of the Red Book does not tell us how effective the Treasury expects clauses 20 and 21 to be or how many microgeneration systems the Treasury expects to be installed by how many people over what period of time. In that respect, this debate has an eerie resemblance to the debate that has just taken place.
	In Committee of the whole House, the hon. Member for Nottingham, South pointed out that responsibilities for reporting on microgeneration and energy efficiency are spread across several Departments—the Department of Trade and Industry, the Department for Communities and Local Government and the Department for Environment, Food and Rural Affairs—and that the Treasury is not currently one of them. He stated that Finance Ministries in other European countries have a more enhanced role and that the lack of that role here leaves
	"a glaring gap in the coherence of our approach to climate change policies".—[ Official Report, 1 May 2007; Vol. 459, c. 1477.]
	In response to that debate, which was necessarily truncated, I thought that the Chief Secretary went through the motions. He said that the new clause was
	"not necessary, because there is already a requirement to produce information on those subjects."—[ Official Report, 1 May 2007; Vol. 459, c. 1480.]
	There is such a requirement, but it does not apply to the Treasury outside the Red Book and the Green Book, to which the Chief Secretary referred the House. However, it is hard to see how those documents give the House what it needs, because they provide less detail than other Departments.
	Sections 7.42 and 7.43 on page 177 of this year's Red Book cover microgeneration. They contain a slightly more detailed explanation of the two clauses than that provided by the Chancellor in his Budget speech. They do not answer the questions that I asked a few moments ago, such as how many extra microgeneration systems the Government expect to see installed as a result of those measures and what the overall effectiveness of the Government's strategy has been to date. In short, the emerging consensus in the House wants a continuing assessment from the Treasury of how effective the Chancellor's microgeneration measures are, and not merely a description of what those measures entail.
	It is not, after all, as though the background to clauses 20 and 21 is completely encouraging. We welcome the direction of travel outlined in last year's microgeneration strategy, but if one compares our record with that of some of our international competitors, we are not setting the pace. By the end of 2004, 200,000 Japanese homes had fitted photovoltaic cells; 300,000 micro-renewable systems have been installed in Germany; more than 10 per cent. of homes in Sweden already use micro-renewable technology to heat their homes; German companies are already generating half the entire turnover of the global wind industry; Japanese firms are at the forefront of fuel cell and hybrid engine technologies; and American companies are leading the way in bringing affordable renewable technologies to the market. We clearly have some way to go to catch up.
	The amendments, which, as I have said, are supported by an emerging consensus across the House, will not automatically improve our position, but the case for them—that the Treasury should publish an estimate of how successful it expects those measures to be—is surely unanswerable. I hope that the Minister will accept the principal amendments, Nos. 34 and 36, but in the event that he does not, may I ask him directly, as I did not get a chance to do so in Committee of the whole House, how many schemes the Treasury expects to be brought into effect by these provisions and over what period of time?

John Bercow: I well recall last year's amendment tabled by the hon. Member for Nottingham, South (Alan Simpson) to which, if memory serves me correctly, I put my name. It seemed to me that its rejection was unjustified. Is it not safe to work on the assumption that if the Government did not think that their proposal will be environmentally effective they would not have introduced it, and that they therefore reckon that it will be effective? Given that, they should surely want to trumpet the fact on an annual basis for some years to come.

Paul Goodman: Yes, my hon. Friend is entirely right. If the Government expect the scheme to be effective, as they surely do, it does not seem unreasonable to ask them for some figures. I apologise to my hon. Friend for omitting to mention his support for last year's amendment, which I must confess had slipped my mind.

Brooks Newmark: Photovoltaic solar panels cost £11,000 to install in a house, with payback in some 25 or even 30 years. Is it not important that we monitor their success, particularly in the absence of economies of scale, because there is likely to be first, little take-up, and secondly, little benefit to society?

Paul Goodman: My hon. Friend is making the central case for the amendments. It is all very well for other Departments to produce reports, but if all we get is a brief summary of the proposals in the Green and Red Books, it is impossible to monitor how successful they may or may not be.
	Amendments Nos. 3, 4 and 5 are drawn from the remarks of the hon. Member for Falmouth and Camborne, who rightly pointed out in Committee of the whole House that there is no good reason to restrict the tax incentives to homes that are producing energy only for domestic purposes. Householders may want to sell any excess electricity that they produce back to the national grid.
	Today is the Chancellor's last opportunity as Chancellor to respond to this emerging consensus, and his last chance to ensure that the Treasury takes the departmental lead on microgeneration and becomes a powerhouse for energy efficiency. I commend the amendments to the House.

Julia Goldsworthy: The hon. Member for Wycombe (Mr. Goodman) talked about the need for an annual report on top of whatever is in the Green and Red Books. What we see on microgeneration in this year's Red Book makes that case more strongly than anything. It makes statements that seem on the face of it to be incredibly positive, such as:
	"The Government today announces that it will allocate a further £6 million—making a total investment of over £18 million—to Phase One of the Low Carbon Buildings Programme for households."
	If one considers that statement in the wider context, one realises that at that point the low-carbon buildings programme was suspended altogether, and that when it was restarted at the end of last month, the maximum grant of £15,000 that was available to households had been reduced to £2,500. As the hon. Member for Braintree (Mr. Newmark) said, the cost of photovoltaic cells is considerable. Many campaigning climate change organisations have been vitriolic about the impact that the change has had. They would far rather extend to more households the opportunity of taking up this option as opposed to probably making it prohibitively expensive for them to do so. The devil is always in the detail, and often the Red Book is not the place to see all the information presented in the most appropriate way.
	I very much welcome the amendments, which reiterate the spirit of those tabled in Committee of the whole House. It is important to make clear the impact of such measures and to be certain that they are not a green fig leaf for a Bill that otherwise contains very few environmental measures and shows the Government's timidity in pushing forward this issue.
	The hon. Member for Wycombe referred to an aspect that I highlighted in Committee of the whole House. Clauses 20 and 21 limit the amount of tax relief available on the basis of an individual's intention not to generate more electricity than would "significantly exceed" that needed for personal use. I do not see why it is necessary to limit it in that way. Surely we should be encouraging people to use the maximum capacity that they have available at a personal level.
	Moreover, there is already a definition of microgeneration in section 26 of the Climate Change and Sustainable Energy Act 2006:
	"the use for the generation of electricity or the production of heat of any plant".
	It then lists the sources of energy and technologies that must be used to qualify for that definition: biomass, biofuels, fuel cells, photovoltaics, water, wind, solar power, geothermals and combined heat and power systems. It also defines the capacity of a microgeneration system: 50 kW for the generation of electricity and 45 kW thermal for the production of heat.
	Given that we have that incredibly specific definition of microgeneration, why is it necessary for the Bill to limit the scheme on the basis of the individual's personal use and intentions? That makes absolutely no sense and prompts the question of what impact and benefit it will have. How will it affect people's behaviour, and how is the Government able to assess that? Surely, as the scheme is based only on what people intend to use, the threshold will be so low that there will not be any real incentive for them to take microgeneration on board. What happens in circumstances where they mistakenly produce more electricity than they intend for their personal use? What happens if they have a wind turbine and it blows a gale throughout the middle of the autumn? What would be their intention in that situation?
	In a whole series of areas, the measure is, on the surface, very welcome, but what is not welcome is the way in which it is limited. On that basis, I commend amendments Nos. 3, 4 and 5, which are virtually identical to amendments tabled in my name and those of my hon. Friends in Committee of the whole House and the amendment tabled last year by the hon. Member for Nottingham, South (Alan Simpson). I would hope that the Minister welcomes them as a way of beefing up what is essentially a very weak green thread running through the Bill.

Alan Simpson: I am grateful to the two preceding speakers for referring to the amendment's point of origin in an amendment to a previous Finance Bill tabled in my name and that of the hon. Member for Buckingham (John Bercow). I mention that because it reflects the genuine cross-party consensus that exists in the interests of promoting the shift into microgeneration and the move towards sustainable and renewable energies.
	I have never understood why the Treasury has taken a line whereby it is willing to go along with the notion that reporting should be included in legislation as long as that reporting does not extend to the Treasury itself. The Energy Act 2004 placed reporting duties on the Department of Trade and Industry, and the Climate Change and Sustainable Energy Act 2006 placed reporting duties on the Department for Environment, Food and Rural Affairs. That is welcome, but the programmes end up being piecemeal. That starts to hit the credibility, not of the intention of policies or reporting duties, but of programmes' ability to deliver the targets to which the Government claim to be committed.
	In a previous debate, there was considerable discussion about regulations that affect new, low-carbon or zero-carbon homes, and we considered the prospect of building 200,000 homes a year that might fall into that category. However, the introduction of microgeneration systems applies more appropriately to the existing 25 million properties in which people live. It is right for the Opposition to draw our attention to the scale of change that has meant the introduction of microgeneration systems into existing properties in other parts of Europe. Although the United Kingdom has a policy commitment, we are so far adrift in practice from our partners or competitors that it is embarrassing.
	Perhaps I should have begun by declaring an interest. I have a roof that is full of photovoltaic panels. The house uses them in conjunction with micro combined heat and power generating systems to produce a surplus of energy, which I supply back to the grid. I hope I do not do that on a scale that would put me in breach of the law, but it would be an absurd law that punished someone for supplying too much green energy back to the system and not polluting enough. Indeed, I would relish being prosecuted for such an offence.

Jeremy Corbyn: I know that my hon. Friend has studied those matters carefully, and I applaud him for it and for his house. Has he made any calculation of the amount of electricity that could be generated if the roofs of this wonderful building were covered with photovoltaic cells? Would we breach the law if we did that?

Alan Simpson: I am sure that we would not breach the law because we make the law. I suspect that a Parliament and parliamentary estate the size of ours could generate more than enough energy to fulfil its needs. We face such transformational challenges not only in Parliament but in society.

Brooks Newmark: The hon. Gentleman makes an excellent point and I support his personal initiative in using photovoltaic solar panelling in his house. When he decided to install PV on his roof, was the decision based on economics or a desire to be green and show his neighbours that he was being green? If we stuck PV panels on the whole of Parliament, it would be hugely expensive, with the payback taking some 25 years or more.

Alan Simpson: My decision was based on both factors that the hon. Gentleman mentioned. I felt that there was no point in Members of Parliament trying to preach to the public about the scale of the changes that need to happen in our society if we were not prepared to act ourselves. There was therefore an element of walking the walk as well as talking the talk to the decision. At the time, it was also an economic decision because I was one of the last beneficiaries of the Government's programme whereby one received a 50 per cent. rebate on the costs of installing solar panels. I was therefore somewhat disappointed when we changed the programme and moved to the low-carbon buildings programme, thus effectively removing such support for PV. The change has effectively doubled the cost of installing PV panels.
	The panels are so expensive in the UK because, by and large, we have to import them and we do that on a minute scale. Fiscal measures that were introduced in Germany show that, if the domestic market can provide for a programme of 300,000 houses with solar roofs, the unit costs of production and installation drop like a stone. Our problem in the UK is our piecemeal set of measures, which continue to treat microgeneration as an infant industry. The fiscal measures that other parts of Europe have adopted mean that microgeneration has become a dynamic and cost-cutting part of their economy.
	Hermann Scheer, the architect of the German feed-in tariff law, came over a couple of weeks ago and met the Minister for Science and Innovation. He pointed out that it was calculated that each adult German citizen spends approximately €2,500 a year on energy bills—that is a combination of bills at home and energy costs in the work place. In a Land or region of approximately 1 million people, that meant annual energy expenditure of €2.5 billion. In conventional terms, that region would buy gas, oil and uranium from an external source and coal from internal and external sources. Expenditure would go outside the region for energy sources that are beginning to run out. By actively promoting microgeneration, regions have instead put the bulk of that €2.5 billion a year into their economies. The multiplier effect of that spending creates jobs and skills and generates taxes in the regions. Mr. Scheer argued to our Minister that microgeneration is not a cost but becomes a dynamic cost-saving measure that results in huge economic security.
	As was said earlier, such measures have given Germany 50 per cent. of the world market in onshore wind turbines and 15 per cent. of the world market in PV. We need to measure against that the effectiveness of our fiscal strategies for promoting a similar sort of dynamic in the UK economy, and our place in the global economy in promoting microgeneration.

Philip Dunne: The hon. Gentleman commendably puts his money where his mouth is in his domestic power generation. Would the latest measure in the low-carbon buildings programme, to which he referred, to limit the amount of grant per household to £2,500 have deterred him from proceeding with his installation? If not, does he anticipate that it will have a significant impact on reducing take-up throughout the population?

Alan Simpson: It would not have deterred me because I had a different starting point. However, if asked to determine whether that made economic sense in the short term, I have to say that the answer would be no. All those with whom I work in the microgeneration industry and all those households that are desperately keen to be part of the process wring their hands in despair at the muddle into which we appear to have got ourselves in the low-carbon buildings programme. I understand that the programme was underfunded to begin with, and that there was a danger we would run out of funding for it within the first couple of months of the financial year. Trying to ration it out on a monthly basis has meant that, unless someone is on the phone in the first hour of the first day of each month, their prospects of getting into the programme are next to none.
	There is clearly a level of public interest in the programme, but that does not make the programme adequate. It ought, however, to give the House an indication of how hungry society is to be part of such a change, and it ought to give the Treasury an indication of why it is so important that it should give a lead on the reporting of the fiscal effectiveness of the measures that it puts in place in the Budget to support that kind of shift. If what we are doing is right in principle, but the scale of intervention is simply inadequate, Parliament needs to be big enough to acknowledge and understand that, and to do something about it.
	We also need to acknowledge that, in every Budget that has been presented since 2002, there have been measures to address energy efficiency in the home and to address microgeneration and the shift to sustainable and renewable energies. Having said that, it would be hard to say that those measures had been anything other than piecemeal, so far as the Treasury is concerned. So far, they have been restricted to changes in the rate of VAT and exemptions from VAT. They have also been supplemented by fiscal measures relating to capital exemptions. Those provisions are to be welcomed, but they do not, in themselves, make for a coherent programme.
	There needs to be a new range of fiscal measures if we are to make our programmes coherent. I am happy for the House to have an argument about what those measures should be. At other stages, we have debated the case for attaching a reduction in the rate of stamp duty to the introduction of microgeneration systems in the home. The coherence of that argument is that it would be at the point of transfer of a property that people would look most closely at the financial savings that could be made if they had introduced microgeneration systems, or if they did so within six months, in which case they could get a rebate. That is a perfectly coherent case for fiscal intervention at a point where families and households make those decisions about change.
	An alternative would be to consider fiscal intervention measures that could be applied in an ongoing way to address annual savings in household expenditure. That could take us into the arena of entitlements to council tax rebates or of the introduction of feed-in tariff systems. Such systems have now been introduced in 19 other countries across the expanded European Union; Britain is one of the few exceptions. It would be perfectly possible for the Treasury to put in place fiscal measures that would promote such a shift to feed-in tariffs. That would afford households the long-term security to work out what savings could be made by taking on a substantial capital investment in the short term that could be set against substantial cash savings that could be planned over a number of years. I am somewhat agnostic as to which of the measures makes the most sense. I would be happy for us to adopt any of them, or any combination of them. They will not happen, however, unless the Treasury puts itself at the centre of the reporting process.
	There is a further option in which the Treasury might be interested. Only a few months ago, the Government announced that they wanted a lead from a number of core cities to promote energy services companies. They asked for ideas on how cities could lead that initiative—

Madam Deputy Speaker: Order. The hon. Gentleman is straying a little wide of the amendments before us. Perhaps he could address his remarks to them.

Alan Simpson: The point that I was making, Madam Deputy Speaker, was that microgeneration is at the core of energy services companies, because they relate to how we use microgeneration at a collective level to support community energy needs.
	In the Netherlands, fiscal measures have been used to support the introduction of microgeneration systems involving "hot road" technologies in school car parks and playgrounds, and in the car parks at health centres. Those measures are driven by fiscal incentives that get built into the costs and allowances that apply at the design stage in the framework of the approach to the built environment in the 21st century. That is a result of a Treasury lead that changed the rules of the game.
	As I said earlier, it frustrates me that, during this Parliament, in every Bill that has been enacted in which targets have been set on climate change, fuel poverty eradication and carbon reduction, the Treasury has exempted itself from the duty to report. All the evidence from elsewhere in Europe and across the globe shows that real change comes when it is driven from the financial heart of the Government. Such change cannot happen if it does not start with a duty to report. What follows from a duty to report is that, when we know what will work and what will not, we can move on to a proper debate about the scale and direction of the programmes that will work. Until we get the Treasury to take ownership of that central co-ordinating role, however, we shall be left planning in fragments.
	If this is the biggest challenge of our time, it will be sad to record that, at the heart of the Government, when Members on both sides of the House and members of the public in every part of the land were knocking on the door, there was no one in at the Treasury. I hope that the Minister will accept the amendments and give the lead that Parliament and the public have a right to expect.

John Redwood: I rise to support the amendments, because I share the impatience of the Conservatives and the Liberal Democrats, and of the hon. Member for Nottingham, South (Alan Simpson), at how small the incentives are in the Bill as drafted. The amendments would make some contribution towards making them a little more generous.
	There is a growing view in the House and outside that much more power could be generated in environmentally friendly ways by individuals and families through their own domestic property. Of course we are not talking about people having a large power station in their back garden and abusing the thing; the Government have made it quite clear that the measures are limited to microgeneration schemes, and they have a rather low threshold for their definition of such schemes. It is therefore even more strange that they should double up the restrictions by putting in clauses that prevent people from producing a little more power than they need for their own requirements on average over the days, the weeks and the months as they look at the balance in and out of their system. I hope that the Minister will succumb to the pressures from inside and outside the House and at least accept the amendments that get rid of that unnecessary restriction.
	The tax reliefs on offer in the Bill as drafted are not very generous. The allowance on chargeable gains is unlikely to produce any money for most of the people who might take up the scheme. We are concentrating only on the income tax relief, which relates only to surplus generated power, so if we are told that there can be no installation that might produce surplus power on average, it means that no tax relief is on offer. The way the definitions will be phrased under the legislation means that they will give with one hand and take away with the other.
	The House, apart from Members on the Treasury Bench, is trying to persuade the Government to be more generous, ambitious and bold in future by including the requirement for annual review. We hope that will bring the Government two realisations: first, that the tax relief they are offering at present is almost zero and that from zero will come little; and, secondly, that as the schemes will not catch on quickly because the tax relief on offer is far from generous, perhaps in a future year, in a future Bill, it will be seen that something bolder and bigger is needed.

John Bercow: My right hon. Friend is forging a progressive consensus with the hon. Member for Nottingham, South (Alan Simpson) to which I am a happy subscriber, but I am puzzled and my brow is furrowed. Can my right hon. Friend explain to the House why there is an instinctive disinclination on the part of the Treasury annually to report? Is it because the Treasury thinks that others report to it and that it is not in the business of lowering itself to report, or is there a better reason that has hitherto escaped me?

John Redwood: Tomorrow the progressive consensus takes over at No. 10 Downing street. We hope that the obstacle has been the current Prime Minister and that when we have a new Prime Minister who wishes to forge a progressive consensus he will want to join the hon. Member for Nottingham, South, my hon. Friends the Members for Buckingham (John Bercow) and for Wycombe (Mr. Goodman), me, and even the Liberal Democrats on this occasion, to show that he is truly persuaded that the progressive consensus is now in favour of much more microgeneration and that he understands furthermore that fiscal incentives are an extremely good way of changing behaviour.
	The House knows that I do not normally favour tax increases and regulations to change behaviour. However, if a tax reduction is on offer it is more my kind of behaviour-changing inducement, so I recommend it strongly to the Government if and when they want to join the emerging progressive consensus. I have often found that the ideas I propose in the House are a little ahead of their time, but this may be one that is not so far ahead of its time that we shall have to forgo all value from it for the foreseeable future.

Brooks Newmark: In achieving the consensus, does my right hon. Friend see a day when the new Prime Minister might install a wind turbine on the top of No. 10 Downing street?

John Redwood: We shall probably not see that any time soon, even with the change of tenant at No. 10 Downing street, but as the hon. Member for Nottingham, South said, perhaps the House can do rather more under the provisions of the clause to provide examples of how we could generate more of our own energy. Members have already said that we generate a lot of hot air that could be used. I suspect we should need a spin turbine rather than a wind turbine, and the new tenant at No. 10 may be particularly good at offering a model that would offer facilities from which he and we might benefit.
	I urge Members on the Treasury Bench to understand the strong feeling that much more could be done. My hon. Friends and others clearly understand that at present the technology is not cheap enough to take off across the board, which is why so few people are adopting it, apart from those such as the hon. Member for Nottingham, South and my right hon. Friend the Leader of the Opposition, who are showing the way. However, to get our constituents enthusiastic about microgeneration we need to introduce real tax relief. The provisions do not do that; the amendments would help a little, but the amendment that requires an annual report might in due course persuade even the Government that they should join this exciting progressive consensus.

Jeremy Corbyn: The Leader of the Opposition and his individualistic wind turbine sum up Tory policies—they are completely individualistic. If, as my hon. Friend the Member for Nottingham, South (Alan Simpson) has just pointed out to me, the Leader of the Opposition had gone for a community wind turbine, he might have had greater success and his chimneys would probably be safer.

David Drew: Collectivism.

Jeremy Corbyn: Absolutely. Some collectivism is still alive and well on the Labour Benches, too.
	I support the proposals for annual reporting on microgeneration. If we are agreed on a policy of support for the idea of microgeneration, especially photovoltaic cells on the roofs of houses, it is obvious that we should consider it every year to see how successful or otherwise it has been and if need be change policy to encourage it further. A large number of people want to put photovoltaic cells on the roofs of their houses so that they can generate some or all of their electricity, with any surplus going into the grid. However, the costs are impossible, partly because, as my hon. Friend the Member for Nottingham, South pointed out, the grant system has ended and been subsumed into the carbon-neutral homes scheme.
	Secondly, because there are so few places in the country where such schemes operate, the cost of the cells is enormous. That need not be so. We simply need to provide a reasonable grant system to encourage people to produce such energy, and reasonable tax incentives. In addition, where grants are awarded for improvements to any public or private buildings a condition should be imposed, such as the standards that apply to insulation and windows, that there should be a degree of microgeneration through photovoltaic and water-heating cells. That seems eminently sensible.
	As my hon. Friend pointed out, if we imposed such rules on new properties it would be helpful. We hope that there will be a big increase in the development of council and social housing, which would be a good opportunity to experiment and to encourage the use of more photovoltaic cells. However, the real issue relates to improvements to existing properties; for example, when people replace roofs or undertake major regeneration there would be a good opportunity to install microgeneration systems.
	The Treasury probably agrees with almost everything that has been said on both sides of the debate, so why cannot the Government accept the amendments? They have been proposed previously and the arguments have been well rehearsed. The argument for considering the success of the provisions is blindingly obvious. If we do not want to go down the road of developing more power stations, the answer lies in our existing buildings, where we can do something towards conserving energy—we have already gone a long way in that direction—as well as generating electricity. Towns in Germany, Austria and elsewhere have taken huge steps in that direction and have thus become centres of excellence for the development of microgeneration technology. Why cannot we do the same? Why are we holding ourselves back when we so readily understand and welcome the arguments?

Brooks Newmark: I turn first to amendments Nos. 3, 4 and 5. I have no need to rehearse the careful arguments advanced earlier in the debate today and in Committee on the issue. However, in the Committee of the whole House, the Chief Secretary implied that the question was one of intention, not of the volume of production—of which we have heard much today. The right hon. Gentleman said that the Government's proposals on microgeneration were
	"targeted at people whose primary intention is to consume in their home the electricity that they generate".—[ Official Report, 1 May 2007; Vol. 459, c. 1479.]
	That may be so, but clauses 20 and 21 are drafted in terms of the amount generated, not the intention behind the generation. Will the right hon. Gentleman attempt to put a figure on what he believes constitutes significant excess?
	Secondly, does the Chief Secretary anticipate any adverse impact on domestic energy efficiency if people realise that there is little incentive or indeed some risk in generating a significant excess? We have heard much about that point this afternoon. Lastly, would not it be simpler to forget the idea of intention altogether and stick with the generation limits already contained in the Climate Change and Sustainable Energy Act 2006?
	There is a compelling need for the Government's policy on incentivising microgeneration to receive some scrutiny, which amendments Nos. 35 and 36 will provide. As we have heard, the most significant challenges faced by those wishing to install microgeneration are the high start-up costs and, consequently, the length of time needed to justify the initial capital costs. In principle, at least, exempting from income tax the sale of electricity from domestic microgeneration is a step forward, as it would seem to speed up the return on that initial investment. I suspect, however, that the measure will make not a jot of difference; it is a classic case of gesture politics.
	First, there is no evidence whatever that HMRC has attempted to collect any tax in that context. If it had done so, the policy could have been curtailed in a memorandum of understanding rather than in legislation. Secondly, the sums involved, I suspect, will be truly minute. In any event, the Government are committed to clamping down on a significant excess of generating capacity, which suggests a policy that is pulling in two directions at once. We have no idea how successful the provisions are expected to be, or how it is thought that they will influence behaviour. While the Government are arguing over pennies, the pounds seem to be going astray. The low-carbon buildings programme seems to have restarted, but the general impression has been one of a policy in disarray and a lack of co-ordination across Government. Waiving income tax on electricity generation will not address the central issue of capital costs, and how else it can contribute remains to be seen.
	A report on the benefits of the policy would be most welcome so that the issue does not continue to obscure the significant challenges faced in the quest to take microgeneration into the mass market. Clearly, we are not there yet. Recently, I met representatives of British Gas to discuss the latest phase of its innovative scheme to incentivise microgeneration: Members with an interest in climate change and energy efficiency will have heard me wax lyrical previously about its successful partnership with Conservative Braintree district council to offer council tax relief in return for cavity wall insulation. That scheme has now been extended to a subsidy of microgeneration technology. However, the numbers are still, at least to my mind, marginal. It costs £11,000 to install a photovoltaic solar panel or, slightly better, £4,300 for solar thermal installation. In return, participants qualify for a one-off council tax rebate of £500 and £300 respectively, in addition to eligibility for a subsidy of about 10 per cent. from the low-carbon buildings programme. Those technologies require some 25 or perhaps 30 years to repay the investment, and are unlikely to have mass market appeal.
	I would like a report to be made to Parliament, as the amendments propose, to see whether the Government's policy has any impact on the numbers. If it does, I shall applaud them. The British Gas representatives whom I met wryly observed that one of the reasons for the scheme's success was that people preferred a tax rebate to a subsidy, even if the amount is the same. In the same spirit, perhaps a tax-free income from microgeneration will prove to be a similarly successful incentive. We shall have to wait for the report called for by the amendments, which I hope the Government will support.

Philip Dunne: I wish to speak briefly in support of the amendments, which are to clauses that I recall describing in Committee as a "puny measure"—because of their impact on the revenue, and because they illustrated the Chancellor's attempts to position the Budget as a green Budget without having any significant impact on take-up of microgeneration. The amendments will therefore highlight and expose for the Government and the public at large the fact that the measure will be meaningless.
	There are two inconsistencies in the Government's approach to microgeneration and renewable energy. First, as the Chief Secretary will know if he has read the National Audit Office's report, the Government have an opportunity to encourage renewable energy in their own building programme. They spend some £3 billion a year, across different agencies, on new buildings and refurbishing existing premises, and they have committed themselves to introducing energy efficiency into those buildings. But when it comes to actual measures—surprise, surprise—they find, as my hon. Friend the Member for Braintree (Mr. Newmark) was saying, that the lack of cost-effectiveness is unfortunately prohibitive. In the case of Nottingham prison, it would have cost more than £2 million to install the energy efficiency measures that the prison authorities wanted; they did not have the budget, so none of them was installed. In the public sector, the payback on solar panels is approximately 18 years. Action taken on such measures would be far more effective than the clause under consideration.
	Secondly, in relation to the low-carbon buildings programme, which, as other Members have highlighted, has been introduced in a shambolic fashion, the companies proliferating around the country trying to help domestic consumers to make such installations have been subject to regulatory overload in the form of the Building Research Establishment. It has now started a system of registration of those installers—a registration process that is adding considerably to the costs and risks of being in business. Most of them have relied on the low-carbon buildings programme grant to encourage customers to take up installations. Not only do they find that those grants are cut from month to month and are unreliable as to availability, but they are now being charged to be registered as installers—£1,800 to get registration, plus an additional £600—

Madam Deputy Speaker: Order. The hon. Gentleman is going rather wide of the amendments.

Philip Dunne: The point of my illustration, Madam Deputy Speaker, was to show that far from easing microgeneration, the Government are making it more difficult through such measures. The Chief Secretary ought to address those issues, rather than introduce gesture clauses.

Stephen Timms: We have had an interesting debate, marked by passion and commitment across the House. We have had debates of a similar tenor on such matters previously.
	Let me remind the House of the purpose of clauses 20 and 21. They aim to remove a barrier, or hurdle, which has discouraged householders from investing in microgeneration. As we have heard, microgeneration is defined in section 4 of the Climate Change and Sustainable Energy Act 2006. That Act requires the Secretary of Sate to consider by next year whether the introduction of targets for microgeneration is appropriate, and to report annually on measures taken to meet that target. We will return to that in relation to the amendment about reporting. The list of eligible technologies is set out in that Act.
	The low-carbon buildings programme has been discussed this afternoon. Between 2002 and 2006, we provided £11.6 million of funding for householder microgeneration installations. The low-carbon buildings programme will provide householders with £18.7 million over two years, including the additional moneys announced in the Budget—a significantly improved level of funding. We are aiming, however, for a sustainable UK industry that is not dependent on subsidy. Grant funding for householders has certainly played its part, but we need to look to longer-term measures that will support the industry in future, such as the energy efficiency commitment, the removal of planning barriers and the zero-carbon homes commitments, including the removal of stamp duty, which we debated earlier.

David Drew: I hear what the Chief Secretary says, but surely the policy would be more credible if we were trying to achieve economies of scale. One problem with the low-carbon building programme is that it is aimed at individual households. To make a real difference, as we see in parts of Europe such as Germany, we need to generate by using renewables on a street-by-street or estate-by-estate basis. What are the ways in which the Government are seeking to achieve that?

Stephen Timms: We are considering a variety of ways, in particular through the renewables obligation. It is a powerful market-based mechanism that is a lever for bringing about the changes that we need. It introduces advantages for householders, but even more advantages for generators. Offshore wind generation has started and other new technologies are being introduced. That is how we can achieve a sustainable and long-term way forward, avoiding the huge costs of some of the feed-in tariff systems on the continent.

Alan Simpson: Will the Chief Secretary reconsider his point about huge costs? As I understand it, according to the figures, the scheme in Germany cost its Exchequer nothing last year, and it cost the energy industry a total of €15 per household bill per year to finance. So far as the Germans are concerned, the claims of huge costs do not stack up.
	Will the Chief Secretary also reconsider what he said about renewables obligation certificates? It would help if the Treasury could examine whether they work in terms of accessibility. I am a generator of surplus energy who has been defeated by the process of claiming ROCs. If those of us who are anoraks cannot get through the maze, then those who are keen but are not anoraks will give up, too, and the system of ROCs will defeat all the Government's intentions.

Stephen Timms: The renewables obligation is proving to be an effective lever for raising the proportion of electricity generated from renewable sources. We have seen that rise pretty sharply over the past few years in response to the renewables obligation. There has been an animated debate in Germany about the costs of the feed-in tariff and other processes. I did not follow the election debate there closely, but I am told that that was a significant element of it. It is certainly not the consensus in Germany that the feed-in tariff measures are inexpensive. I am sure that one can present the figures in a variety of ways, but there is serious political concern about the costs of the arrangements.
	I am disappointed to hear that my hon. Friend has been unable to claim any ROCs for his own electricity generation. I shall take that point away and consider it. I agree that the mechanisms need to be accessible to change behaviour. There is no doubt, however, that the renewables obligation is starting to bring about the large-scale changes that we need for an up-scaling of electricity generation from renewable sources.
	The primary purpose of microgeneration is for people to generate their own domestic electricity, but they can, and are most welcome to, sell surplus electricity back to the national grid, as my hon. Friend has done. ROCs are available. I am confident that people are receiving those from domestic generation, although I shall check that point further. The certificates can then be sold to energy companies.
	However, receipt of income in that way raises the question of liability for tax. Uncertainty about the tax position has been a disincentive to the take-up of microgeneration. Clauses 20 and 21 aim to remove that disincentive. Together they ensure that householders do not face a tax bill by investing in microgeneration equipment for their own domestic use. They exempt from income tax and capital gains tax the proceeds from the sale of surplus electricity and from the receipt and disposal of ROCs. They remove the uncertainty and therefore the disincentive. I think that the House will agree that that is a welcome change.
	The precise value of the income tax exemption will depend on how much surplus electricity a householder will generate. A householder can expect to make between £120 and £240 a year from a wind turbine and perhaps £40 a year from a solar photovoltaic system, although that will depend on the weather conditions and the contracts that are in place. We announced in the Budget that the Government will ask Ofgem to examine how householders can benefit more from the prices paid to them when they export electricity to the grid. Perhaps that will give us an opportunity to address the problem of microgenerators accessing ROCs.
	The tax exemptions are available only for householders who have installed microgeneration primarily for their own domestic use. They do not apply to individuals who invest in microgeneration with the intention of selling surplus electricity or of dealing in ROCs as a commercial activity. That is right. The test of significantly exceeding the amount that they use themselves is simple and straightforward, and it ensures that the tax exemptions are properly targeted.
	It has been argued that the "significantly exceeding" test should be removed from both the exemptions, so widening the scope of the tax exemption to include those individuals who are seeking to make a commercial profit from domestic microgeneration. I argued in Committee, and argue again now, that that would be ill advised. The clauses provide clarity for householders who are involved in microgeneration. They ensure that unless an individual is trying to make a significant profit, he will not face a tax charge as a result of microgenerating electricity.

John Redwood: What would happen if a family of five put in generation equipment that was suitable for their requirements and shortly afterwards the children went to university, one of the two adults left home, the family broke up and only one person was left living in the house? Would that person be deemed to be generating far more power than he should and therefore have a tax liability?

Stephen Timms: The test is based on intention. Most householders are not installing microgeneration systems that substantially exceed their total consumption in a year. As long as that is the case at the point of installation, depending on the circumstances, I do not think that they would be caught. However, it is right that a business based on commercial microgeneration should pay tax on its profit just like any other commercial activity. To do as the amendments propose would be unfair. They address a problem—uncertainty about the tax position—that does not exist if the primary purpose is commercial. It would be odd to give tax incentives to electricity companies to set up power stations in people's homes, to use the right hon. Gentleman's phrase. Why should there be a tax unfairness against renewable generators? That would be the wrong way to go. The "significantly exceeding" test is the right approach. I hope that the amendment will be withdrawn.
	By deleting clause 21, amendment No. 35 would remove entirely the exemptions for both income tax and capital gains tax which apply to the receipt and sale of ROCs. That would simply perpetuate the uncertainty—indeed, it would make the uncertainty worse for householders who have invested in microgeneration equipment for their home—and undermine the aim of removing uncertainty, which from the tenor of the debate is something that I think the whole House would support. That uncertainty has discouraged take-up of domestic microgeneration. Removing the clause would make the position worse again.
	Finally, I come to amendments Nos. 34 and 36, which would impose a statutory obligation on the Treasury to publish an annual report on the effectiveness of the new income tax exemptions. I noted in particular the heartfelt nature of the calls by my hon. Friend the Member for Nottingham, South (Alan Simpson) that the Treasury should take that on. I know that we have had this debate before, but I make the point to the whole House again. Last year, the Government published their microgeneration strategy, which included the commitment to assess progress on a continual basis and publish a report each year as part of the annual report on the energy White Paper. There is no case for duplicating that with another report along those lines.
	Nor do I agree with my hon. Friend that nothing ever happens unless the Treasury takes charge of it. That is a counsel of despair. The Secretary of State with responsibility in that area rightly has the lead responsibility and has to report in collaboration, of course, with the Treasury. I can tell the House that Treasury officials have met representatives of the microgeneration industry a couple of times just in the last six weeks. The Treasury is firmly engaged with this issue, but does not have the policy lead, which rightly rests with the Secretary of State, and that is also where the reporting duty should rest.

Jeremy Corbyn: I am delighted to hear that the Treasury is firmly engaged in this process, and that is good news, but my right hon. Friend understates the power of the Treasury. Clearly there are tax issues and costs involved, as well as huge benefits for the community. What is the problem with reporting on microgeneration issues once a year? Decisions made by the Treasury will have a huge impact on whether or not we promote microgeneration.

Stephen Timms: Of course the decisions of the Treasury have a wide impact on a broad range of issues, but it would be wrong to say that therefore the Treasury should lead on all of them. The appropriate Secretary of State is the right person to lead and, in this case, there is a clear statutory obligation to annual reporting. The annual reports should address the kind of issues that we have discussed in this debate and, no doubt, information from the Treasury will enable those reports to be completed. However, it would be a mistake to say that the Treasury should lead on this or all the other issues to which one might apply the same argument. The right person to make the report is the appropriate Secretary of State.

Paul Goodman: As an indication of the Treasury's willingness to report, will the Chief Secretary now answer the question that I put to him initially? How many microgeneration schemes does he expect these tax reductions to produce?

Stephen Timms: As I said earlier, the Climate Change and Sustainable Energy Act 2006 requires that the Government consider, by November next year, whether it is appropriate to introduce targets for microgeneration and, if they are introduced, to report annually on things done to meet those targets. That decision will be made by November next year —[ Interruption. ]

Madam Deputy Speaker: Order. The level of conversation in the Chamber is rising. Members who have been present throughout the debate are entitled to hear the closing remarks.

Stephen Timms: I am grateful to you, Madam Deputy Speaker. I am about to draw my remarks to a conclusion—[Hon. Members: "Hear, hear."] I note the enthusiasm of the House for my concluding observations. The amendments are unnecessary and I ask the House to reject them.

Paul Goodman: This has been an interesting debate and it has formed itself around an observation by the hon. Member for Nottingham, South (Alan Simpson). He argued that what one does not report on, one is less likely to be held accountable for. What one is not held accountable for, one is not likely to have much of an incentive to improve. If the Treasury were to report once a year on the effectiveness of its microgeneration strategy, it would set out clearly how successful it expects the strategy to be; it would raise expectations and standards; the Treasury Committee would take great interest in it; and it would enable the Government to be held to account for what they are doing under these two clauses.
	The main amendments that we propose, amendments Nos. 34 and 36, are simple. They ask the Government to give an assessment not of their wider strategy, but simply of how successful they expect the clauses to be.

John Bercow: My hon. Friend will agree that the Chief Secretary is a prodigiously intelligent fellow, but although we listened intently we have not heard of any ill effect that could possibly flow from the adoption of the amendments. As an earnest of good intent, therefore, why does not the Chief Secretary accept them?

Paul Goodman: The Chief Secretary has simply argued that it would be duplication for the Treasury to produce a report about tax, which is its responsibility and not the responsibility of other Departments. The Chief Secretary, who is indeed prodigiously intelligent, was radiating institutional resistance to the idea that once a year the Treasury should be required to report on how effective the measures are likely to be.
	I cannot ask the House to vote on all the amendments, but I will pluck out the main one, so it is our intention to press amendment No. 34 to a vote. We regret that, in his last full day as Chancellor, the Chancellor and his Ministers have not taken the chance to join the consensus that has been demonstrated across the House this evening. I beg to ask leave to withdraw the amendment.
	 Amendment, by leave, withdrawn.
	 Amendment proposed: No. 34, in page 15, line 17, at end insert—
	'(3) The Treasury shall prepare and lay before the House of Commons annually a report on the effectiveness of the tax relief mentioned in subsection (1) in achieving its objectives, with particular reference to the change in the amount of electricity generated by microgeneration systems.'.— [Mr. Paul Goodman.]

Question put, That the amendment be made:—
	 The House divided: Ayes 205, Noes 269.

Question accordingly negatived.

Clause 35
	 — 
	Industrial and agricultural buildings allowances

Julia Goldsworthy: I beg to move amendment No. 39, page 27, line 2, leave out clause 35.
	The intention behind the amendment is to raise concerns about the impact of changes to the industrial and agricultural buildings allowances on particular businesses. I want to highlight the comments of the Institute of Chartered Accountants in England and Wales, which said at the outset:
	"We recognise that the changes to the capital allowances rules are part of a balanced package that has also seen the headline rate of corporation tax reduced from 30 per cent. to 28 per cent."
	However, it goes on to say:
	"Nevertheless, we have many concerns about the proposed changes and the underlying policy, particularly given that smaller businesses will not benefit from the 2 per cent. cut in the main rate of corporation tax."
	The key concern is that there does not appear to have been sufficient consultation on the impact of the changes. Although there is a consensus that there is a need for reform to the tax system, questions have been raised about the motivation for the proposal we ended up with in this year's Finance Bill. Was it a considered attempt to reform the tax system or was it something included at the last minute to try to make the corporation tax proposals as a whole add up?
	The allowance or charge for businesses on disposing of agricultural and industrial buildings is being withdrawn for disposals taking place after 20 March 2007. I understand that in next year's Finance Bill the annual writing-down allowance will be phased out. If the move was a considered one, it is certainly not regarded in that light by businesses directly affected by the changes. Like other members of the Public Bill Committee, I have been contacted by an organisation called Towngate Estates Ltd, which will be greatly affected by the changes.
	The person who wrote the letter wanted to highlight the impact that the changes would have on his business and, in particular, he wanted to highlight the lack of consultation. He writes:
	"Over the past few years the Inland Revenue has produced a number of consultation documents on the reform of corporation tax. I am aware of documents in August 2002, August 2003 and December 2004."
	In his comments, he quotes the August 2003 paper, which says:
	"it is envisaged that the new relief would replace and extend the current Industrial Buildings Allowances and Agricultural Buildings Allowances".
	As he goes on to say, there was no reference to the fact that IBAs would be stopped altogether. In fact, the language is about extending and reforming the existing allowance, rather than about getting rid of it. The same goes for the December 2004 paper. Again, the paper suggests that the allowance could be extended. The person writing the letter concludes by saying that, in 2011, the proposals
	"will cost the company an extra £53,000".
	That is a real example of what I am talking about. There has not been adequate consultation.
	My other concern is how the change will impact on different sectors. One of the concerns raised by the Institute of Chartered Accountants is that it is more likely to impact on a number of UK business sectors, including manufacturing, farming and capital intensive sectors such as the hotel trade, which is currently anticipating the need for capital investment prior to the forthcoming Olympics. My concern is that people involved in those businesses will be affected by the changes on the basis of decisions that they may have made up to 24 years previously. In that respect, the change has a retrospective impact. That relates to the comments we made yesterday about how the small business rate increases would impact on different sectors and regions of the economy, depending on how they were weighted in terms of how capital intensive they were, the size of the business and what it was focusing on.
	That concerns me, because I have businesses in my constituency that will be affected. There is a farm in my constituency—like most farms in Cornwall, it is very small—that made one of the first commercial objective 1 grant applications for European funds that were available to try to help develop the economy in some of the poorest parts of Europe. The farm made use of that allowance to diversify into cheese production and it qualified for agricultural buildings allowance. The farm has an ABA residue of only about £15,000; the dairy, which is newer and has been more heavily invested in, has a residue of more than £300,000. The point is that decisions to invest were made in good faith and jobs have been created as a result, but now that is being placed under threat because of a decision taken at a much later date. I am sure that there are similar examples all over the country.
	I am reminded of the merits of the new clause tabled by the right hon. Member for Birkenhead (Mr. Field), which we discussed yesterday. He talked about the need for real clarity in terms of the impact of personal taxation changes on particular groups. This is another classic example of where we need to understand the interrelated impact of lots of taxation decisions in the Finance Bill on different business sectors in different regions. Businesses also need to understand how all the proposals interact.
	As I bring my remarks to a close, I want to highlight again the concerns of the Institute of Chartered Accountants. There are concerns that there has not been sufficient time for detailed consultation and consideration and there is a feeling that the Government should withdraw the clause at this point in order to undertake more consultation and consideration. If they will not do that, will they grandfather existing assets so that companies such as the farm in my constituency do not face a much more uncertain tax future?

David Drew: I rise to support what the hon. Lady has said. I have a farmer in my constituency, Rob Warren of Moreton Valence, who has undertaken a major capital project that involves building a new milking parlour. The cost of the whole project comes to something over £1 million. Part of the proposal to undertake that work was predicated on getting the agricultural buildings allowance, which, as far as I understand, is tapered down over a period of time. To lose that allowance at this time is, at the very least, problematic to his farm and his business. Without the allowance, it would have been much more difficult for him to develop his proposal—certainly at this time.
	I have sat down with Mr. Warren at his table in his kitchen—as most of us do when we meet farmers—and I am the first to accept that we are talking about something that is hideously complicated. My simple economist's brain went no way towards grasping the fine mesh by which the measure has been working over the years. Nevertheless, it seems to have worked in the sense that Mr. Warren and various other people in the agricultural industry have been encouraged to undertake major improvements to increase the efficiency of their businesses—as the hon. Lady said— and, in the case of Mr. Warren's business, to achieve a greater milk yield. I have seen Mr. Warren's impressive operation.
	Will my right hon. Friend the Chief Secretary explain why the proposed change was brought forward? While there has been a reduction in corporation tax, the measure will not help business planning in this particular industry. Indeed, it will create a disincentive because farmers who were thinking about making major capital investment have probably reconsidered that. I hope that my right hon. Friend will be able to persuade me and Mr. Warren that the Government have alternative plans so that such important projects can be brought forward. I hope that the measure has not been rushed through, given that it could damage the agricultural trade, which has taken advantage of the allowance. The industry might be peculiar in that it has had a special arrangement with the Treasury. However, it would not be helpful if that arrangement was lost at a time when the agriculture sector is in difficulty and the milk business, especially, is in a somewhat parlous position. I hope that my right hon. Friend will give me some good news and that he can reassure Mr. Warren that his investment was worth while and that the Government are helping him.

James Paice: I want to address the way in which the agricultural buildings allowance affects tenant farmers. I am sure that my hon. Friend the Member for Fareham (Mr. Hoban) will cover the wider aspects of the amendment. However, I doubt that the Treasury talked to the Department for Environment, Food and Rural Affairs about the matter and examined the agricultural holdings legislation.
	Some 40 per cent. of farmers in this country are tenants who do not own the land on which they farm. Agricultural holdings legislation—tenancy legislation—allows them, with the permission of the landowner, to construct buildings on the land, but they never own the buildings. The ownership reverts to the landowner either at the end of the tenancy, or at the end of any fixed period agreed between the landowner and the tenant.
	In the past, the agricultural buildings allowance has been the only form of return for tenant farmers constructing such buildings, apart from the benefit of the buildings. They have no capital asset to sell or let because they are not the owners of the land. The retrospective nature of clause 35 means that they will lose the ABA and have nothing. As the hon. Members for Stroud (Mr. Drew) and for Falmouth and Camborne (Julia Goldsworthy) said, the measure will hit all farmers, but it will hit especially hard those tenant farmers who do not own the land on which a building is constructed.
	I appreciate the Chief Secretary's interest in my speech. I suspect that what I am saying is news to him and that he did not know about the agricultural holdings legislation. It would be a tremendous gesture if he were to agree that the approach in the Bill is not sensible, at least until he has talked to DEFRA officials about the impact that the measure will have on the 40 per cent. of farmers in this country who do not own their farms and rely on the ABA as the only way of getting back the capital that they have invested in a farm building that will never be theirs to dispose of, or to benefit from in any other way.
	I support the gist of the amendment. I hope that the Chief Secretary will think about the damage that the measure will do to an important sector of our agricultural industry.

Peter Atkinson: I agree entirely with my hon. Friend the Member for South-East Cambridgeshire (Mr. Paice). The change could not have happened at a worse time for the farming industry, which has gone through a funding revolution following the introduction of the single payment scheme. All sorts of new things are spinning out as a result of that. Farmers are advised to put their houses in order by farming for profit, not for subsidy. That requires structural changes to agricultural holdings, especially buildings.
	As we heard from the hon. Member for Stroud (Mr. Drew), farmers have recently been investing considerably in reorganising their buildings and structures. Such investment leads not to appreciating assets, but depreciating ones. It results in metal buildings that are designed for a particular purpose, and their time will expire over the next 20 or 30 years. That is why farmers who invested large sums of capital took into consideration the fact that they would benefit from the agricultural buildings allowance. In effect, the change will bring about retrospective taxation that will cause farmers considerable problems.
	Let me cite an example. A farmer in my constituency used to leave his cattle out for a large part of the winter because a disused quarry on his land was a particularly good place in which do so. Environmentalists discovered rare plants in that quarry and said that they would love him to move the cattle out of the quarry over the winter and put them in a building. Given that he was moving up to higher level stewardship, he invested some tens of thousands of pounds in new buildings. When he did so, he took account of the fact that he would receive the ABA, but now he will not. I urge the Chief Secretary to consider whether people who have made such investment should receive grandfather rights because the measure brings about unfair retrospective taxation.

Stewart Hosie: Hon. Members have made incredibly valid points. The hon. Member for Stroud (Mr. Drew) mentioned the dairy industry. We have heard about the situation facing tenant farmers who have no rights to their properties. We have also heard the key point that many structures covered by the allowance will depreciate in value from day one, even if a landowner has the rights to them. That point was glossed over in Committee. Hon. Members on both sides of the House have argued strongly that the matter should be considered again.
	I want to make a point about the industrial buildings allowance, as I did in Committee. The change to that allowance will have an impact on the tourism sector. When we had a brief debate in Committee about investment in hotels, the Chief Secretary rightly said that things are not the same as they were in 1978, which was when the allowance was first introduced. It is worth reiterating that in the light of a conversation that I have had since that debate.
	Things have changed since 1978 because the market for city breaks, long weekends and short breaks is now huge. There are places in the UK that were not tourist destinations even 10 years ago, let alone 20 or 30 years ago. Restaurateurs and hoteliers, especially, wish to invest in such areas so that they can provide the correct quality of offering to allow their businesses to compete in such a massive market. I raise that point because much of the tourism and hospitality sectors, as well as large parts of the farming sector, especially the dairy sector, are made up of businesses with incredibly low margins.
	In Committee, the Chief Secretary cited alternative allowances that will be made available, especially for the tourism sector. I discussed that with friends in the hospitality sector, including an ambitious hotelier who is determined to drive up the quality of his establishment so that it becomes a destination for the city-break market. He requires the IBA to assist him to invest, given that margins are tight and the costs are high. When I told him about the other allowances that might be available to help him to deliver what he wants for his business and the area, he just laughed. The new allowances go no way towards taking the place of the IBA to assist the kind of projects that such ambitious hoteliers and business men wish to put in place.
	I hope that the Chief Secretary takes on board all the comments made during the debate, especially about the removal of the IBA from those in the tourism sector. The measure will have an impact on my constituency. The removal of the ABA will have an especially large impact on the dairy sector. As we know, that sector has been absolutely hammered due to the squeezing of margins. I am sure that the constituent of the hon. Member for Stroud thought long and hard about making his investment. I hope that his business manages to survive and that the Government will consider how to deal with the situation, whether through grandfather rights for existing investments, or a more fundamental rethink about changes to the IBA and ABA.

Mark Hoban: I do not wish to go over all the ground of tonight's debate and the quite extensive debate in Committee. The comments by my hon. Friends the Members for South-East Cambridgeshire (Mr. Paice) and for Hexham (Mr. Atkinson) and the hon. Member for Stroud (Mr. Drew) demonstrate the importance of Report stage on the Floor of the House, during which people with constituency experience can make powerful points on the impact on their constituents of changes announced in the Budget.
	No one can argue that the system of capital allowances can remain unchanged for ever. When my hon. Friend the Member for Tatton (Mr. Osborne) announced before the Budget our plans to cut corporation by 3p, he said that some reform of the system was needed. However, I believe that where significant changes are made, there should be proper consultation with the people who are most closely affected. The reliefs that we have been discussing are valuable; the Red Book indicates that the saving to the Treasury from the 1p reduction in IBAs and ABAs in the 2008-09 financial year will amount to approximately £250 million. Only 13 per cent. of property qualifies for the two reliefs, so the benefit is concentrated on relatively small but important sectors of the economy. When such a significant change is made, it is important to consult, so that Ministers can understand the consequences more clearly.
	In Committee, the Chief Secretary did not give me the impression that the changes had been fully thought through. Now that we are moving to a period of more open and consultative government, perhaps the Treasury should start thinking more carefully about such matters. In Committee, the right hon. Gentleman said:
	"it is not customary to consult on changes in rates of taxation or on the reduction or removal of tax reliefs." ——[Official Report, Finance Public Bill Committee, 22 May 2007; c. 292.]
	In fact, the Government had launched a consultation on the future of corporation tax. In its representations on the changes, the British Property Federation referred to the consultation document on capital allowances that had been published, and to the conclusions of that process. The federation pointed out:
	"In fact, the consultation actually highlighted the lack of tax relief for most taxpayers' expenditure on business premises which is regarded as putting the UK at a competitive disadvantage to its competitors."
	The BPF also said that the other point that emerged from that consultation was:
	"There was general support for a commercial buildings allowance, incorporating the current Industrial, Hotel and Agricultural Buildings Allowances."
	During the consultation that took place only a couple of years ago, strong support was expressed for the existing system of allowances. Given that support, it is even more important that the Government should have consulted properly, instead of rushing to cobble together a package in response to my hon. Friend the shadow Chancellor's proposal of a cut in corporation tax.

Stephen Timms: Will the hon. Gentleman clarify that point? I do not think that there was support for the current system of allowances. There was support for a universal allowance for commercial buildings, but the present system, with its distortions and inconsistencies, did not attract wide support.

Mark Hoban: Let me read the quotation again:
	"There was general support for a commercial buildings allowance, incorporating the current Industrial, Hotel and Agricultural Buildings Allowances."
	There was therefore support for a wider allowance, but not for the abolition of the existing allowances. I am not sure what point the Chief Secretary is trying to make. There was support for a broader set of allowances.
	My point is that, despite what the Chief Secretary said in Committee about it not being customary for the Government to consult on tax reductions and reliefs, they had already conducted a consultation on the future of corporation tax which indicated industry's views on particular allowances, so it seems strange that they did not consult before making changes that are significant to a number of sectors. In Committee, the right hon. Gentleman referred to the regulatory impact assessments produced for the annual investment allowance, saying that that might cover some of the same areas, but in a sense, the die had already been cast: the changes in the Finance Bill set in train a series of events that would lead to the abolition of these other allowances. Regardless of the rights and wrongs of particular allowances, there should have been consultation on the changes and it was wrong of the Government to proceed so quickly, without having thought through the points that had been made after the Budget was announced.
	In Committee, the Chief Secretary argued that, despite the end of IBAs and ABAs, the tax system still contained recognition for those buildings, because repairs and maintenance could be offset against a company's profits in determining their tax charge. Of course that is true—but that also applies to other assets that qualify for capital allowances. That is therefore not an especially strong argument to deploy in connection with IBAs and ABAs. He also said that depreciation would be reflected through the capital gains tax calculation on disposal of the assets, but CGT also applies to the disposal of other assets that qualify for capital allowances.
	Furthermore, as my hon. Friend the Member for South-East Cambridgeshire pointed out, holders of agricultural tenancies do not own the buildings, so if the buildings are sold, their investment will not be reflected in that process. The implicit relief that the Chief Secretary referred to will not benefit them, because they do not own the buildings. They will gain no tax benefit other than in relation to the costs of repair and maintenance. In Committee, I mentioned representations that I had received from various people in the agricultural sector on the sums that had been locked up in unrelieved capital expenditure. Tenant farmers will find that particularly difficult now: they made the investment on the basis that the relief would continue, but it is being taken away from them.
	The agriculture sector is not alone in being affected by the change. The hon. Member for Dundee, East (Stewart Hosie) talked about the hotel sector, and I know that Bob Cotton of the British Hospitality Association has gone to the Treasury to discuss the impact of the changes in capital allowances on the sector that he represents. Many hoteliers have invested heavily in new property in the expectation that the relief would continue.
	Small businesses, too, are affected by the change. In Committee, it was argued that they will qualify for the annual investment allowance, but that applies to future investment; they will not benefit in respect of past investments. Small companies will be hit by the increase in the small business rate of corporation tax, and we know that the changes in IBAs, ABAs and other capital allowances have been used to fund the decrease in the mainstream rate of corporation tax, so many small companies face a double whammy: their corporation tax rate will increase, but they will lose the benefit of the industrial and agricultural buildings allowances.
	The Government have got themselves into a real mess. They did not properly think through the impact on those sectors of the removal of the allowances and how it would affect those who had made investments. Tonight, the Chief Secretary must not just make the case again, but demonstrate that the Treasury thought the changes through and was aware of their effects on those important sectors. If he cannot make that case, many people will wonder how much thought goes into putting together a corporation tax reform package such as the one that the Chancellor announced in March. At the moment, the evidence suggests that the package was cobbled together rather hastily and was not well thought through.

Stephen Timms: Let me start by outlining the purpose of clause 35 and how it fits into the wider package of business tax reforms in this year's Budget. The main feature of the package is the forthcoming reduction in the main rate of corporation tax from 30 to 28 per cent., giving the UK the lowest rate of corporation tax in the G7. The package of reforms to the business tax system is the most comprehensive for more than two decades, and it has three main objectives. The first is to maintain and strengthen the UK's internationally competitive position. The second is to encourage further growth in the UK economy through higher levels of investment, more efficient markets, and greater innovation. The third is to deliver a fairer result for the UK taxpayer, and a more efficient use of Exchequer resources.
	I am grateful to the hon. Member for Falmouth and Camborne (Julia Goldsworthy) for quoting, I think correctly, what the Institute of Chartered Accountants said about the measures being a balanced package. She also raised a number of concerns, which were repeated by other contributors to the debate, and I shall deal with them in turn. First, she asked about consultation. I want to emphasise that the allowances are not being withdrawn without prior warning, or without our giving people time to plan for the changes. The rate of writing-down allowances remains unchanged for this year, and it will be gradually reduced between 2008 and 2011.
	The hon. Member for Fareham (Mr. Hoban) quoted me accurately on customary practice with regard to such changes: it is not customary to consult about changes in rates of taxation, or the reduction or removal of tax reliefs. There was consultation on corporation tax reform between 2002 and 2005, and that consultation explicitly recognised that limiting allowances to certain types of buildings, as currently happens, is a specific distortion affecting investment in property. The idea of a general commercial buildings allowance was mooted, but in all frankness I say to the hon. Gentleman that that would be prohibitively expensive. I am not sure whether he was arguing for such an allowance, but if every new building in the City, or in Canary Wharf, attracted a buildings allowance, even though buildings of that kind never have done so before, it would be hugely costly. One can understand why the property industry would favour a move of that kind, but it would be prohibitively expensive.
	If one accepts the argument that it is a distortion for allowances to apply to some buildings and not others, the logical approach is to do what we have done, and to move, in a well managed and phased way, towards abolition. That is particularly the case given that most commercial and industrial property, and the land on which it stands, appreciates rather than depreciates in value, although we have heard about some exceptions. I think it is right to draw the conclusion that we drew: other reforms would be more beneficial to the UK economy than a commercial buildings allowance.
	On manufacturing, I say to the hon. Member for Falmouth and Camborne that industrial buildings allowances account for only about 4 per cent. of the total capital allowances received by manufacturing, so I do not expect the withdrawal of the allowances to have widespread effects on the sector. Since the announcements, I have met representatives of the Engineering Employers Federation, who told me about the high degree of confidence in the manufacturing sector. Only about a third of all industrial buildings allowances are claimed by manufacturers, and on the whole those claims tend to be fairly small and are spread among a wider population. Of course, the cut in the main rate of corporation tax will stimulate domestic and foreign investment, and overall our analysis shows that there is a positive revenue impact on large manufacturers.
	To pick up the question asked by the hon. Member for Fareham, a lot of careful analysis has gone into the judgments that lie behind the announcements in the Budget. The package is designed to promote investment and growth. Manufacturing firms which invest will continue to benefit from the new arrangements. The issue of small manufacturers was rightly raised separately, but they will be among the main beneficiaries of the new £50,000 annual investment allowances. The increases in research and development tax credits for small and medium-sized enterprises, as well as for large companies, will also bring significant benefits for manufacturing.
	The hon. Member for Dundee, East (Stewart Hosie) asked about hotels. We also had an exchange on the subject in Committee. He is right that it was in 1978 that the industrial buildings allowances regime was extended to qualifying hotels, in order to assist with the growth of UK tourism. I say to him today, as I did in Committee, that the position is now very different. It is difficult to claim that the situation for the tourism sector is such that exceptional allowances are required to support it. The sector is doing well and growth is strong, and I am delighted about that, but I really do not think that there is the case today that there was then for extending particular allowances to hotels.

Stewart Hosie: That is the same argument that the Chief Secretary to the Treasury made on the previous occasion. Not all towns and cities are established tourist destinations with high-margin, good-quality provision. Many locations, and cities in particular, are striving to get there. They still need investment in a market which is bigger than it was in 1978 but is highly competitive. The ability to fund the provision of quality services is key, and I ask him to consider that point.

Stephen Timms: The hon. Gentleman may well be correct that it is right that there should be geographically targeted regeneration help, not just in the hotel market but in other sectors, to assist the regeneration that all of us want. However, I suggest that there is no case for a generalised allowance for the tourism sector, although there was 30 years ago. In general, the sector enjoys high levels of profitability. The sector as a whole will derive significant benefits from the 2 per cent. cut in the headline rate of corporation tax. As I said to him in Committee, for smaller hoteliers, the annual investment allowance of £50,000 will be a significant incentive for investment.
	My hon. Friend the Member for Stroud (Mr. Drew) and the hon. Members for Falmouth and Camborne, for South-East Cambridgeshire (Mr. Paice) and for Hexham (Mr. Atkinson) raised issues concerning agriculture. I say to them that the withdrawal of allowances is not an isolated measure. In the Budget, we announced cuts in the basic rate of income tax and the main rate of corporation tax. We also announced the new annual investment allowance, which is particularly important for small farmers. It is an allowance of £50,000 for business investment from 2008; that will be extremely helpful. It is possible that farmers who continue to invest will find that once the annual investment allowance is in place they will be better off as a result of the package as a whole, rather than worse off.

James Paice: The Minister implies that a farmer who has already invested in a new building in the past few years and is unable to claim the 4 per cent. allowance can in future claim against the £50,000 allowance. That is not my understanding, and the Minister is indicating that I am correct. In that case, there is no succour for all those people who have investments on the ground now but cannot continue to claim the agricultural buildings allowance. To be honest, to suggest that the £50,000 will help them is a distraction from reality, as they will be stuck with an investment for which they cannot claim any allowance.

Stephen Timms: The point that I want to underline is that farm businesses that have invested in the past and that continue to invest in future will benefit from the new annual investment allowance. In many cases, as a result of the package as a whole, they will find that they are better off, rather than worse off. I am not saying that that is the case for every farmer, but we are explicitly changing the system to provide additional incentives for investment.
	The hon. Member for South-East Cambridgeshire made a particular point about tenant farmers. On the cessation of an agricultural tenancy, the tenant farmer, I am advised, is often compensated for building works on the land, although that depends on the terms of the tenancy agreement. In future, no doubt, agreements will be negotiated that reflect the tenant's intended expenditure. We want to adopt a consistent approach that ensures fairness for taxpayers in all sectors. We have not adopted sector-specific measures: we have introduced arrangements that will apply across every sector, as that is the right approach.

David Drew: May I make two observations? First, farming is different, as many farm buildings are specialised. With the best will in the world, a milking parlour cannot be converted into flats—it is a particular building on which a farmer makes an investment decision, considering the fact that it will depreciate in value over time. Secondly, to take up the point made by the hon. Member for South-East Cambridgeshire (Mr. Paice), the changes in tenancy law have resulted in more farm business tenancies. In some respects, tenant farmers are better able to get on to the land, but they may lose the advantage of not being subject to discrimination because they are unable, as a result of the shorter tenancies, to secure those benefits. We must consider the way in which we give those farmers incentives to invest in their business, otherwise they will never take it forward.

Stephen Timms: The point that I would make to my hon. Friend and to the House is that the new annual investment allowance will be an effective incentive. Farming and other businesses in his constituency, as he will know better than I, will continue to invest. I hope that as a result of the arrangements they will invest more than they would otherwise invest. If they continue to invest and benefit from the new allowance, they may find that they are better off as a result of the package as a whole.

Peter Atkinson: rose—

Stephen Timms: I should like to make a little more progress, as I know that there is concern that we should be expeditious.
	Retrospection is an important point. Corporation tax and the accompanying allowances are set annually. It is not legally retrospective to reduce or remove an annual tax allowance. That is a legal point, but it is important to underline it. We will withdraw the allowances in a phased manner between 2008 and 2011 to give businesses certainty and time to plan for their eventual withdrawal. One of the objectives of the exercise is simplification. Industrial buildings allowances have been recognised, not least in the work of KPMG, as a significant compliance burden. To leave those allowances in place for up to 25 years, for example, would have resulted in the retention of that burden throughout that period. I do not agree that the measure is retrospective, and the changes that we have made will certainly contribute to simplification.
	Clause 35 is integral to those reforms, as it paves the way for the gradual withdrawal of industrial and agricultural buildings allowances over a four-year period. Those allowances were first introduced over 60 years ago, replacing the old mills and factories allowance in the 1940s. The needs of the economy have changed dramatically since then, and the old allowances do not reflect the reality of modern business. I simply put this point to the House: there is no good economic case for a subsidy for some buildings but not for others. The time has come to grasp the nettle and take a much more rational approach.
	We did not want to withdraw the allowances overnight, however outdated they are. Instead, we have given a year's notice of their withdrawal and then, as I said, the allowances will not be withdrawn straight away. From April 2008 the writing-down allowances will be gradually reduced by 1 percentage point per year until 2011, so there will be time to plan and adjust to the changes.
	Clause 35 removes, with effect from 21 March this year, balancing adjustments and the recalculation of writing-down allowances when a qualifying building changes hands or ceases to qualify for the allowances. It is designed to prevent manoeuvres which would have allowed some businesses to accelerate allowances in an unfair way. Our intention is that the withdrawal of the allowances should be fair and orderly. The House will, I think, share that intention. The amendment would delete the clause.
	Ninety-five per cent. of the benefit of the allowances go to large businesses, and 50 per cent. of the total amount of industrial buildings allowances goes to the 100 largest companies in the country. Those companies will gain from the reduction in the main rate of corporation tax. On small businesses, I repeat what I said in Committee: for small businesses, as separately for large businesses, each package is fiscally neutral in each of the years set out in the scorecard in the Red Book.
	The real impact of the amendment to remove clause 35 would be to permit forestalling and other activities so that some businesses could gain an unfair advantage. There would also be a huge cost to the Exchequer—around £300 million. We pre-announced that the allowances will be phased out. Removing the clause would create a huge risk in property transactions between the Budget day announcement and the main provisions in the Finance Bill next year. It would scupper the ambition to withdraw the allowances in a fair and orderly way, so I hope that the hon. Member for Falmouth and Camborne will decide not to press the amendment to a Division.

Julia Goldsworthy: The Chief Secretary continually referred to the package of measures as a whole and the positive impact that that would have on many businesses, but that is cold comfort to the many farmers who, as we learned this evening, will be adversely affected by the changes. The Minister may talk about annual investment allowances that will be available for decisions in future, but the changes will affect decisions that have already been made. Businesses will not have the relief going forward.
	I understand the legal definitions of retrospectivity, but those decisions were made in anticipation of a certain tax environment. That has suddenly changed. What confidence can people have in any new allowance systems that are set up, after those under discussion have been changed without notice? The clause will reduce confidence in any future decisions that they may make. Research and development tax credits were mentioned, but these are the kind of businesses that would not consider using them. Questions have been raised about whether the availability of R and D tax credits affects the decision to invest, or whether that is investigated after the decision has been made.
	The debate has been worthwhile and given us the benefit of expertise, particularly in relation to tenant farming, which we did not explore in detail in Committee. It demonstrates a lack of understanding in the Treasury about how these issues will affect vulnerable groups. The contributions of the hon. Members for Stroud (Mr. Drew), for South-East Cambridgeshire (Mr. Paice) and for Hexham (Mr. Atkinson) highlighted the different ways in which the changes will be felt. They will have a devastating impact on businesses.
	I shall withdraw the amendment, but with a heavy heart. As I said at the outset, there is a need to review the allowances system. More work should be done to understand its impact on various sectors. I hope the Minister will initiate work to identify those that will be most adversely affected. The changes may be revenue-neutral as a whole, but for some sectors they will be a devastating blow. I beg to ask leave to withdraw the amendment.
	 Amendment, by leave, withdrawn.

Clause 70
	 — 
	Anti-avoidance

Julia Goldsworthy: I beg to move amendment No. 37, page 47, line 21, leave out lines 21 to 25.
	Amendment No. 37 relates to anti-avoidance measures in this year's Finance Bill. Like the amendments discussed earlier this afternoon, it is a probing amendment. It focuses on proposed new section 75C, which is a stamp duty land tax anti-avoidance provision that refers to Treasury provisions to make exceptions to its application. My question is whether there are further areas in which avoidance may be taking place.
	We broadly welcome clause 70, which permanently implements regulations that were approved by the House of Commons in January—until that point, the regulations were valid for only 18 months. We note that those provisions are different from the initial regulations, because they make it clearer how the legislation relates to relief in areas in which anti-avoidance measures should not apply. However, I want to draw the Chief Secretary's attention to a particularly topical area—special purpose vehicles.
	I have spoken to people involved in commercial property transactions, and it seems that there has been a clampdown on special purpose vehicles, but there has also been considerable growth in their use for residential properties. On 19 June,  The Times stated:
	"Figures from Savills, the estate agent which specialises in properties at the top end of the market, show that some 68 per cent. of properties selling for more than £5 million last year went to foreign buyers."
	Part of the problem with SPVs is the fact that people pay a lower rate of stamp duty by buying a residential property through an offshore company. The article continued:
	"As a case study, The Times examined the Land Registry records for properties on the west side of Cadogan Square...Of 13 properties looked at, five were held by offshore companies...A further three were registered to companies not listed at Companies House."
	In a similar vein, the  Daily Mail reported:
	"Latest Land Registry figures show that a total of 827 homes sold for between £500,000 and £1 million in February. A further 207 sold for between £1 million and £2 million...On Bishop's Avenue in Barnet, one of London's most exclusive addresses, almost 40 per cent. of the 83 houses are owned by companies or trusts."
	That means that the properties are liable for a stamp duty rate of 0.5 per cent. rather than 4 per cent.
	The concern is that non-domiciles or people who want to invest in a second home or country estate are using that vehicle, which provides an opportunity to secure massive benefits. Of course, if the property is that person's primary residence, they would be liable for capital gains tax if they were to purchase and sell in that way. The vehicle is being portrayed as the standard way to buy a high value residential property that is not a primary residence.
	After looking on the internet for a few minutes, I found a company—I will spare its blushes—which is specifically advertising ways to minimise tax in buying residential properties. It uses the peg of the 2012 Olympics in London to highlight the impact of the Olympics on residential property prices and provides information on how property prices increased in Barcelona, Atlanta, Sydney and Athens. It states that with the correct structure in place, it is possible for an offshore company owner to live in the property on a full-time basis or enjoy occasional use of the property when travelling to the UK without removing the associated tax benefits of offshore ownership. It also states:
	"The most straightforward way of holding your investment property is through a private limited liability company",
	which it recommends should be an offshore company. It is clearly standard practice for many conveyancing solicitors dealing with high value properties to recommend this as a way of minimising stamp duty payments. Does the Minister think that that should be looked into? Many of the candidates in the deputy leadership election singled it out as an area where there does not appear to be a level playing field. It offers significant savings for those able to understand how these vehicles work and to employ specialists to advise them and for those buying very high value properties, whereas those buying properties at lower prices are paying proportionately much higher rates of stamp duty.

Rob Marris: I have been listening to the hon. Lady's remarks and cannot square them with the amendment, which as I understand it—I may well be misreading it—would remove two subsections giving the Treasury the power, by order, to disapply certain anti-avoidance measures. Can she help me on that?

Julia Goldsworthy: The hon. Gentleman is right to say that the amendment applies to that specific part of the Bill. My point is that the Treasury should perhaps be looking to extend the provision further instead of disapplying it.
	Does the Treasury intend to respond to the concerns raised by deputy leadership candidates, and does it have any estimate of the extent to which SPVs are being used to minimise stamp duty land tax? I hope that it will look into that issue and perhaps address it in next year's Finance Bill.

Theresa Villiers: I should like to deal first with the substance of amendment No. 37. I welcome the opportunity to look again at the anti-avoidance provisions in clause 70, which the amendment seeks to change, as the hon. Member for Wolverhampton, South-West (Rob Marris) pointed out. I will address the points made by the hon. Member for Falmouth and Camborne (Julia Goldsworthy) in due course.
	I am concerned about the amendment because it would remove subsection (11) of new section 75C, which contains one of the few safeguards in the new anti-avoidance regime and as such is an important provision. It is not without its problems, but it is better to keep it in than take it out, as there will be cases where it is important for the Treasury to ensure that new section 75A is disapplied in the way provided for by new section 75C(11). That is because, as I pointed out in Committee, new section 75A is very wide-ranging, as well as controversial. Subsection (11) will provide a bit of a safety valve if the fears that I expressed in Committee materialise in the operation of the section.
	The drafting of new section 75A and the anti-avoidance provisions in clause 70 have been described by the Chartered Institute of Taxation as "fundamentally deficient" and so wide as to render the provision "almost unworkable". Similar concerns have been expressed by the Law Society, the Institute of Indirect Taxation and the CIOT's stamp taxes practitioners group. I am advised that the impact of the provisions is so wide-ranging that checks will probably have to be carried out in virtually all property transactions. That will cause serious conveyancing headaches and give home buyers yet another problem to worry about.
	The key problem is that new section 75A could catch wholly innocent transactions simply because they involve a series of steps. It requires only that "one person (V)" disposes of property and "another person (P)" acquires it, that a number of transactions have taken place "in connection with" the disposal and acquisition, and that the amount of stamp duty land tax payable in respect of those transactions is less than that due on a notional direct transaction between V and P. Where the conditions apply, SDLT is charged on the notional transfer between V and P. The problem is that the wording of proposed new subsection 75A(1) is so broad that even transactions linked only through conveyancing succession could trigger the operation of the proposed new section 75A and its anti-avoidance provisions.
	The concern is even greater when one realises that the transactions could take place years apart yet still trigger the operation of the proposed new section, as there is no temporal limit on the operation of the anti-avoidance provisions. For example, if V sells a property to A for £300,000, and A sells it a year later to P for £250,000, proposed new section 75A could apply, thus making P liable for SDLT on £300,000 even though he had no involvement in the earlier transaction. I am told that virtually all sub-sales, in which the sale on to P happens straight away, would be caught. Getting hold of the information about earlier transactions that is needed to check whether there is any danger of triggering proposed new section 75A could add significant delays and costs to home buyers and other property purchasers.
	HMRC appears to think that all problems can be solved by producing guidance, and it has responded to concerns essentially by producing a white list of transactions, which it believes will not be caught by the proposed new section. However, guidance is not a sufficient substitute for properly drafted legislation. The Bill could affect every high street solicitor and conveyancer in the country, and many of them simply will not have the expertise or resources to keep track of HMRC guidance. Relying on guidance is difficult enough in specialist matters, such as group relief and real estate investment trusts, when a relatively small, well defined body of practitioners is affected, but it gives rise to far greater problems in the context that we are considering.
	There is an even more important problem, which has recurred throughout our debates on the Bill. As Lord Upjohn once famously commented:
	"A taxpayer should be taxed by law not untaxed by concession."
	It is not acceptable for the Government to adopt excessively wide anti-avoidance legislation, which catches a range of innocent transactions, and then seek to give HMRC discretion about the taxpayers to whom to apply it. That contravenes not only the principles set out by the House of Lords in the Wilkinson case that a tax-collecting authority cannot ignore legislation and cannot have significant discretion in tax collection, but the constitutional principle that Parliament, not the Executive, has the right to determine taxation in this country.
	Proposed new subsection 75C(11), which amendment 37 would delete, enables the white list of cleared transactions to be given legal force via secondary legislation. In a sense, proposed new subsection (11) is an admission that proposed new section 75A is excessively wide. I hope that it will be useful in giving statutory force to the white list in future. However, enabling exemptions for specific sorts of transaction—and even for specific taxpayers—is an unsatisfactory method of solving the problems of an excessively wide provision. I believe that the Chief Secretary acknowledged in Committee that specific taxpayers could be exempt. That is a strange way to draft one's tax measures. It would be better to draft a more rational and targeted anti-avoidance clause. However, deleting proposed new subsection (11) would not be helpful.
	Let me deal with the issues that the hon. Member for Falmouth and Camborne raised. I listened with interest to the points that she made about the methods used to avoid paying stamp duty. If she presented detailed, costed and fully researched proposals, my colleagues and I would be happy to consider the case for change. However, I advise against rushing to judgment on the matter. The deputy leadership election in the Labour party and the row about private equity has pushed non-domiciliary tax rules up the political agenda, but we do not want the tax law equivalent of the Dangerous Dogs Act 1991. We need more empirical evidence and an opportunity for thoughtful, objective and considered reflection based on the facts.

Julia Goldsworthy: I agree with the hon. Lady that discussions in the press about private equity tend to lock on to something that is easy to define. Yet not only non-domiciliaries but anybody who wants to put a residential property into an offshore company may benefit from the mechanism. We must be clear that we are not specifically attacking non-domiciliaries but that we need to target the mechanism.

Theresa Villiers: I am grateful to the hon. Lady for that intervention; she has made a useful point. There might well be areas in which the rules on non-doms—or indeed, on the use of offshore companies—could be reformed and tightened. However, I would emphasise that, before embarking on any reform of the system, it is vital that we properly assess the impact of any change on our gross domestic product, on the City of London and on tax revenues. Carefully targeted reform of the non-dom rules—or indeed, the rules on the use of offshore companies—aimed at closing unfair loopholes is of course worth considering, and the Conservatives would be prepared to do that. It is vital, however, that any move to change those rules should not result in ill-advised or ill-thought-through legislation adopted in response to tabloid headlines.
	We must ensure that we approach this issue with caution, particularly given the importance of the City of London and its attractions for mobile foreign professionals. Reforms, if they are to go ahead, must be carefully thought through and conducted only after serious and proper analysis and extensive and effective consultation, to ensure that we get this issue right.

Stephen Timms: Clause 70 is one of two clauses in this year's Finance Bill that we have introduced to tackle stamp duty land tax avoidance schemes. This clause counters two types of scheme: those using leaseholds and those using sub-sales that have been specifically developed to avoid payment of stamp duty land tax. Clause 71 addresses another kind of avoidance. The two schemes that clause 70 tackles have sought to avoid payment of stamp duty land tax by adding often complex additional stages into the sale of a property in such a way as to remove the need to pay tax on the transaction.
	When we debated this clause in Committee, concerns were expressed that it could affect those engaged in innocent transactions rather than those involved in deliberately seeking to avoid payment of tax. I explained in that debate how we intended to protect innocent taxpayers, and how we had listened to the representations made to us about the measure. I also pointed out how we had shown that we were willing to change the clause in order to protect those involved in innocent transactions. I hope that I also demonstrated how we would operate the provisions fairly—for example, by ensuring that retrospective taxation powers would be used only if they favoured the taxpayer. The hon. Member for Chipping Barnet (Mrs. Villiers) was right to say that the amendment would remove one of the very safeguards that we have included in order to protect innocent taxpayers who might unintentionally be caught by the clause.
	I shall confine my remaining remarks to the amendment, other than to say in response to the hon. Member for Chipping Barnet that we have tried to ensure that the scope of the clause is limited, so that it covers only the specific avoidance methods that we wish to prevent. We have acted on representations that we have received, and our amendments will help legitimate transactions. In drafting the clauses, we became aware that if they were too specific, they might allow some avoidance schemes to continue without challenge. We have therefore included proposed new subsection (11) so that transactions inadvertently caught can be excluded. That is a helpful move.
	The amendment seeks to delete some lines in clause 70 that will allow the Treasury to disapply the main provisions of the clause—proposed new section 75A—in specified circumstances. We had hoped that this proviso would rarely, if ever, have to be used by the Government, but we need it in case the need arises. If the amendment were accepted, HM Revenue and Customs would have no option but to tell a taxpayer in such circumstances, "I am very sorry, but although we know you weren't trying to avoid paying us stamp duty land tax, what you have done has inadvertently triggered our anti-avoidance provisions and unfortunately you have to pay us tax as prescribed by this provision." That would be unfortunate. That is the reason why the clause reads as it does.
	The hon. Member for Chipping Barnet referred to a famous comment which she attributed to Lord Upjohn, although I am advised that it was actually Mr. Justice Walton who uttered the remark that
	"A taxpayer should be taxed by law not untaxed by concession".
	I see the sense in that comment, but in circumstances such as those I described an innocent taxpayer might have to pay tax in situations that we did not expect when we drafted the legislation. I suspect that a reference to the words of Mr. Justice Walton, or indeed Lord Upjohn, would probably not satisfy someone who found themselves in that position.
	Finally, I welcome the concern of the hon. Member for Falmouth and Camborne (Julia Goldsworthy) to deal with avoidance. She is perfectly right to make the point that we need to be vigilant, as new avoidance mechanisms may arise. However, we have demonstrated in the changes we made in previous legislation to end relief on seeding trusts that we are prepared to act to prevent tax avoidance when we become aware of it. We have done so again in the Bill.
	The hon. Lady asked about special purpose vehicles and residential properties. At present, only a small number of properties are affected, but I confirm that we will keep the matter under review. Once again, we shall not hesitate to act robustly if the legislation on stamp duty land tax is abused. Given that reassurance, I hope that the hon. Lady will, as she indicated, not press the amendment to a vote.

Julia Goldsworthy: As I said at the outset, the amendment is intended to be probing, so that we can understand why that aspect of avoidance, which appears to be a growing issue, was not tackled in the Bill. As I pointed out earlier, Savills estate agent said that of 300 homes in London that sold for more than £5 million in 2006, only 118 were registered with the Land Registry, which suggests that the remainder were sold through offshore companies and thus not registered.
	The debate has given us the opportunity to raise legitimate concerns about the use of special payment vehicles to minimise stamp duty land tax. As the hon. Member for Chipping Barnet (Mrs. Villiers) and the Chief Secretary know, there are certain difficulties in trying to formulate an amendment that does not have revenue-raising implications, so our proposal was the easiest way of raising the issue. I shall certainly try to find out if there is a more detailed way to tackle it, because at present SPVs not only mean that there is not a level playing field for property buyers in London; they could also be further inflating the property market at the top end. They could have a wider destabilising influence on the housing market, so I shall find a way of raising the issue again if the Chief Secretary does not make proposals himself, as I hope he will in the next Finance Bill.
	The concerns raised by professional bodies about the provisions are that they are a mini general anti-avoidance rule. The subsections singled out by the amendment are a way of trying to limit that. One proposed solution was to implement a clearance procedure, so perhaps the Chief Secretary will comment on that.
	I have been reassured that the right hon. Gentleman is taking the issue seriously, so I beg to ask leave to withdraw the amendment.
	 Amendment, by leave, withdrawn.

Clause 97
	 — 
	VAT: joint and several liability of traders in supply chain where tax unpaid

Amendment made: No. 2, page 70, line 13, at end insert—
	'( ) In section 97(4) of that Act (orders ceasing to have effect unless approved by House of Commons), after paragraph (ea) insert—
	"(eb) an order under section 77A(9) or (9A);".'.— [Mr. Timms.]

Schedule 3
	 — 
	Managed service companies

Theresa Villiers: I beg to move amendment No. 8, page 92, line 21, leave out from 'person' to first 'the' in line 22 and insert
	'whose sole or main business (either alone or together with that of any associate) is the provision or facilitation of'.

Mr. Deputy Speaker: With this it will be convenient to discuss the following amendments:
	No. 9, page 92, line 23, leave out 'involved with the company' and insert
	'regularly involved (either directly or through an associate) with all or most aspects of running the company on an ongoing basis'.
	No. 11, page 92, line 29, leave out 'influences or'.
	No. 12, page 92, line 29, at end insert 'or'.
	No. 13, page 92, line 30, leave out lines 30 to 34 and insert—
	'(c) exerts a substantial degree of influence over the provision of those services by providing a standardised company product to the individual ("the worker") whose services are then provided by the company.
	(2A) For the purposes of subsection (2), arrangements involve a standardised company product if—
	(a) the arrangements have standardised, or substantially standardised, documentation—
	(i) the purpose of which is to enable the implementation, by the worker, of the arrangements; and
	(ii) the form of which is determined by the provider, and is not tailored, to any material extent, to reflect the circumstances of the worker;
	(b) the worker enters into a specific arrangement or series of arrangements; and
	(c) that arrangement or that series of arrangements is standardised, or substantially standardised, in form and is connected with the provision of services by the worker.'.
	No. 10, page 97, line 14, at end insert—
	'(3A) References in section 61B to an associate of a person ("P") shall include a person who, for the purposes of securing that the individual's services are provided by a company, acts in concert with P (or with P and other persons).'.
	No. 14, page 98, line 15, leave out 'an officer of Revenue and Customs considers'.
	No. 15, page 98, line 22, leave out 'encouraged or'.
	No. 16, in page 98, line 26 [Schedule 3], at end insert—
	'(2A) No person shall fall within the scope of subsection (2)(c) above unless they knew or could have reasonably been expected to know that the services of the individual were being provided by a managed service company.'.
	No. 17, page 98, line 32, at end insert—
	'(3A) HM Revenue and Customs may not pursue any person mentioned in any paragraph of subsection (2) under the provisions of this section unless, in the opinion of an officer of Revenue and Customs—
	(a) it is impossible to recover the specified amount from any other person mentioned in any of the preceding paragraphs of subsection (2), or
	(b) it is impracticable to recover the specified amount from any of those persons.'.

Theresa Villiers: Throughout the debate on schedule 3 and managed service companies, the Opposition have recognised that there is an avoidance problem at the borderline between the employed and the self-employed, and that not all workers currently operating through managed service companies are genuinely in business on their own account. We would support measures to tackle that problem, but only if they were clearly drafted and appropriately targeted. Schedule 3 complies with neither of those two conditions, which is why we tabled amendments both in Committee and on Report to try to remedy the problems.
	Anne Swain of the Association of Technology Staffing Companies has told me of her concerns about the
	"huge amount of uncertainty around these provisions."
	The uncertainty around schedule 3 is costing people their jobs and their livelihoods. There is a real danger that innocent parties—contractors who are clearly in business on their own account—will be hit by collateral damage simply because they choose to outsource aspects of the management of the companies through which they provide their services.
	After the IR35 debacle and the millions spent on compliance checking, many in the contractor community feel victimised by this Chancellor. They resent the fact that the legislation will make it more difficult to use advisers who specialise in the contractor market. They also find it hard to understand why restrictions are being placed on their ability to outsource matters relating to their company, but larger businesses face no such constraints.
	Before addressing the amendments directly, I should make it clear that I welcome the Financial Secretary's clarification in Committee of a number of points relating to how the legislation should be interpreted. I shall refer to a number of his statements during the debate. The Opposition seek to persuade the House, however, that amendments are still necessary. Welcome though the Financial Secretary's words of comfort in Committee were, and welcome though HMRC guidance will be, the protection of a change in the statute will still be needed to remedy the problems with the drafting of schedule 3.
	It is possible to use  Hansard in interpreting legislation, but only in limited circumstances. In Pepper  v. Hart, the House of Lords restricted that to instances in which the relevant statute was
	"ambiguous or obscure, or leads to an absurdity".
	Nor can HMRC guidance provide an adequate answer to the problems in relation to the legislation. Certainly, it is useful, and it is regrettable that it has yet to be published, despite the fact that the regime has been in operation since April. One cannot, however, realistically expect thousands of contractors potentially affected by the legislation to check HMRC's website and keep track of guidance, as with the problems to which I referred in relation to clause 70.
	Moreover, guidance cannot be relied on in court and can be changed or withdrawn at any time. In a number of examples, HMRC indicated in guidance that legislation did or did not apply in a certain way, and then changed its mind and sought to use it in exactly the way that it said that it would not: for example, in Bibby  v. Prudential Assurance, and in Sema Group Pension Scheme Trustees  v. Commissioners of Inland Revenue. In both cases, HMRC had given a clear indication of how it expected the legislation to work in guidance, and then sought to go back on that.
	Relying purely on guidance would also contravene the principle in the House of Lords decision in Wilkinson, and the constitutional principles to which I drew the House's attention during the debate on stamp duty. HMRC's controversial record on the enforcement of IR35, and the numerous cases in which an allegation of failure to comply with IR35 has been made and later dropped, show the risks of leaving tax inspectors with too much discretion. Relying wholly on guidance rather than making sure that the legislation is clear would give tax inspectors too much discretion.
	On amendments Nos. 8 to 10, schedule 3 means that any freelancer must ask the key question whether his professional advisers could fall into the category of an MSC provider, which would change his tax status from that of a service business to that of an employee. The definition of an MSC provider is contained in paragraph (d) of proposed new section 61B in schedule 3, and covers any
	"person who carries on a business of promoting or facilitating the use of companies to provide the services of individuals".
	As many professional bodies have repeatedly pointed out, that is exactly what many accountants do. They will frequently advise their clients as to the best corporate structure to use, establish companies for them and go on to provide company secretarial services and process payments relating to those companies. Similar issues arise for company formation agents and other professionals providing company secretarial services.
	It is true that the Financial Secretary gave some comfort on that point in Committee, stating that even when the specific exclusion for professionals in subsection (3) does not apply,
	"the purpose of the legislation is not to include within the definition of MSC provider accountants, tax advisers, lawyers and company secretaries who provide advice or other professional services to companies in general. Those persons are not in the business of promoting or facilitating the use of companies to provide the services of individuals, nor are they regarded as involved with the company in the way in which the legislation envisages." ——[Official Report, Finance Public Bill Committee, 15 May 2007; c.175-76. ]
	That is a welcome clarification, but as Professor Anne Redston of King's college London has pointed out:
	"the worry is that this is not what the legislation actually says".
	There is no exclusion for those who facilitate the use of companies to provide the services of individuals only in the course of providing services to companies generally. Indeed, it would be quite difficult to draft such a provision without leaving loopholes. It seems to me that looking at the drafting of paragraph (d), the mere provision of services to a range of different companies, some of which happen to be used for the provision of services of individuals, would be enough to bring the adviser within the scope of the legislation, whether the Financial Secretary says so in Committee or not.
	Amendment No. 8 would remove the threat from accountants and other professionals who carry out such activities as part of a wider practice of accountancy and business advice. Amendment No. 9 would ensure that only those who had a close day-to-day involvement with the running of the service company and a wide range of its activities would trigger the MSC provisions.
	The two amendments would focus the legislation on the sort of situations in which the provider and not the worker is in the driving seat—where the company is essentially an emanation of the provider rather than a separate entity run by the worker. The effect would be to target the MSC provisions at the people the Government seem to have in mind—those for whom the provision and facilitation of service companies is a core and discernable part of their business.
	The amendments are revised versions of those tabled in Committee. Amendment No. 10 has been added in response to the concern expressed by the Financial Secretary in Committee that an MSC provider could combine its business with other services to avoid being caught by the legislation. I hope that the changes would ensure that the provider cannot use the cover of linked services provided by associates to avoid measures in the legislation. The amendments are tighter than those rejected in Committee.
	Amendments Nos. 10, 11, 12 and 13 address similar concerns, but they can stand alone and should be considered independently by the Financial Secretary. They address the serious problems with proposed new section 61B(2), which provides that if a third party influences the service company, it is sufficient to amount to involvement and to trigger the MSC provisions.
	Taking a commonsense interpretation, every professional adviser could be said to influence their client. There is no point in engaging professionals unless the intention is at least to consider acting on their advice. Why would people pay their fees if they are not interested in being influenced by their advice? Again, some welcome comfort can be drawn from the Financial Secretary's comments in Committee:
	"I think that hon. Members would accept that there is a difference—between a person who provides independent, tailored advice to a client, who is then able to consider that advice before accepting it or rejecting it, and the person who simply supplies a client with a standard solution or product that the client accepts. It is not the intention that the former situation—the provision of advice—be considered to be influencing in this context. However, the latter situation— supplying a standard solution or product—is regarded as influencing." ——[Official Report, Finance Public Bill Committee, 15 May 2007; c. 175.]
	There are two reasons why amendments are still needed despite those assurances. The first concerns the practical difficulties. They are outlined by Institute of Chartered Accountants:
	"We are concerned that the definition of 'involved', as explained by the Financial Secretary...is difficult to apply in practice. This relies upon the client of the MSC Provider receiving advice rather than a 'solution' which the client accepts without fully understanding the consequences. This may be determinable if HMRC were present at the conversation with the client but there will be little evidence that can distinguish between the two situations after the event."
	Any accountant, particularly one specialising in a particular area, may offer a fairly standardised package to a significant number of clients if they have similar requirements. After the event, it may be difficult to determine whether individual tailored advice has been given but the similarities between the customers has resulted in the same arrangements being made, or whether a standardised solution has been provided into which the adviser has pushed the customer.
	The second and more serious problem with relying on the Financial Secretary's statement is the same as before: it is simply not consistent with what the legislation actually says. The explanatory notes say that "influences" should bear its normal meaning. The OED defines "influences" as "to affect the condition of" or "to have an effect on". The Minister's interpretation of "influence" as involving essentially a take it or leave it situation in which the client has little say over the nature of the structure or how it operates is a gloss on the statute and is at odds with the common-sense interpretation of the word.
	Amendments Nos. 11 to 13 seek to take what the Minister has said and insert it into the legislation, so that the provision of a standardised service will trigger the MSC provisions but not a bespoke one. While not ideal, such an approach would at least reduce the risk that contractors who use accountants will inadvertently bring their service companies within the MSC provisions.
	Another important reason to amend subsections (1) or (2) or both is that the safe harbour proposed in subsection (3) for those who provide only
	"legal or accountancy services in a professional capacity"
	gives inadequate protection to advisers and their contractor clients. There are of course several concerns about what is included in the term "legal or accountancy services" and they were aired in Committee. However, a further worry is revealed when one examines what the explanatory notes have to say about the words "in a professional capacity", which is that
	"professionally qualified persons normally would not be considered to be an MSC provider except to the extent that they are in the business of promoting and facilitating the use of companies to provide the services of individuals."
	So in looking at the meaning of subsection (3) one is simply thrown back on to subsection (1). It seems that subsection (3) will be of limited use unless the problems with subsection (1) that I have outlined are resolved.
	If the Minister will not accept the amendments to subsections (1) and (2), I hope that he will at least address the questions that I put to him in Committee, which he was unable to answer then, about the scope of the safe harbour for professional services.
	First, is it the nature of the services provided that determines whether someone is an MSC provider, or is the question determined by the qualification or the professional status of the person providing the service? Is it possible for anyone who is not part of a regulated profession to use the subsection (3) safe harbour? Do people need a current practising certificate to use it? What about accountants and other tax professionals, who are not registered, but who are employed in-house? And to what extent can service providers outside the remit of the traditional professional set-up use the safe harbour?
	In the past, I understand that the Government have always been resistant to attempts to control or regulate the term "accountant" on the grounds that that could be anti-competitive. It certainly restricts competition if the outcome of the legislation is that freelancers and contractors can no longer outsource accountancy services to specialist providers but are forced to use only traditional accountancy practices. There is at least a risk that differentiating tax treatment on the basis of whether one holds a qualification from a professional body might be either anti-competitive or breach EU discrimination law.
	This debate also gives the Minister an opportunity to address some of the other questions that he did not answer in Committee about different service providers and how they are dealt with by subsections (1), (2) and (3), including in particular franchise advisers; factoring and invoice discounting houses, which help to follow up unpaid invoices; and back-office companies which provide services relating to payroll, supplier payments and so on. Those firms provide some of the very services the legislation uses to identify MSC providers. For example, they often pay the worker's tax and trade creditors. Is it the intention to turn all the clients of back-office service companies into MSCs even when the workers in question are clearly in business on their own account?
	I turn now to the second limb of the Government's proposals on MSCs, which is the third party debt rules contained in proposed new section 688A. Those are far reaching and leave professional advisers potentially on risk for thousands of pounds of their clients' taxes, even if they have no avoidance motivation and their involvement with the MSC is inferential or unwitting. Section 688A could leave accountants and other advisers up and down the country liable to the last penny of their personal wealth. In making directors liable, the rules are much more powerful than the normal circumstances where such people are liable for the debts of their companies, never mind the tax debts of people with whom their companies might be loosely connected.
	Even a lowly payroll clerk working for a scheme provider could be bankrupted should the Revenue proceed against him or her as someone "actively involved" in the provision of services via an MSC within subsection (2)(c) of section 688A. The Financial Secretary said in Committee that he did not intend ordinary employees of either MSCs or relevant third parties to be caught. However, whether he likes it or not, they are in scope and so their protection will be the tenuous one of a few words in  Hansard and the discretion of Her Majesty's Revenue and Customs.
	That degree of discretion is a hugely powerful tool in the hands of the Revenue. Serving notice, for example, on a company's employees that they are in danger of having to pay out thousands of pounds in tax debts for their employers' clients could have a startling effect. It could certainly force the employer to pay up to the Revenue in double-quick time, regardless of whether the demand for payment was justified.
	"So much the better," the Minister might respond, but there, I think, we have the truth of it. It seems to me that these provisions have been drafted in a deliberately wide-ranging and ambiguous way in order to scare people away from a particular type of service provision, regardless of whether a tax avoidance motive is involved or not.
	To use tax legislation to deter and punish in this way raises some significant constitutional concerns. That is not what the tax system is supposed to be used for, and this is no victimless constitutional question. Already, some contractors are finding their work drying up because third parties are afraid to engage them for fear of falling foul of the third party debt rules.
	Many of the concerns about section 688A flow from the fact that paragraph (c) of subsection (2) provides that any party who "encourages" the provision of the services of a worker by an MSC could become liable for the tax due on the deemed employment payment imposed by the legislation. That is why we have tabled amendment No. 15 to delete "encourage" from paragraph (c). This probing amendment is designed to elicit some clarity for the many businesses potentially affected by the MSC legislation and deeply worried about whether their day-to-day activities might be viewed as "encouraging" within the meaning of paragraph (c).
	For example, by providing companies to be used by contractors an accountant or company formation agent could be said to have encouraged the provision of the services via MSCs. Any accountant who provides advice on the appropriate corporate structure could also, as a matter of logic, be said to be encouraging the use of that structure and hence the provision of services by the MSC. If accountants advertise or promote corporate services to contractors, that surely would amount to encouraging people to use these services. If the legislation were targeted on those who encouraged individuals to use MSCs, one could perhaps see the logic, as that would more accurately focus section 688A on those actively pushing workers into MSCs.
	I think that they are the people whom the Government want to target, but that is not what section 688A says, as it refers only to encouraging the provision of the services by the MSC. So as long as a person encourages the company to provide the services, it seems to me that that person is at risk of being caught by section 688A, regardless of whether he or she knew that the company was an MSC.
	Arguably, that means end-clients may find themselves liable for the tax debts of the contractors and freelance workers whom they engage. Surely by paying a company to provide services, an end-client is encouraging that company to provide them. What clearer example of encouragement could there be than direct financial inducement? Equally, a worker who finds other contractors to take part in a project could be said to be encouraging the provision of services by those companies.
	A further anxiety surrounding the term "encourage" is that it could prevent recruitment businesses from holding an approved list of company suppliers and advisers. Any recommendation or advice regarding a company supplier given to a worker could constitute "encouraging", and the Financial Secretary confirmed in Committee that holding such a list could give rise to problems under the legislation—contrary to the indications given by HMRC on that point. The unfortunate effect of that would be to remove a useful compliance check that at present serves to steer contractors away from dubious operators in the market.
	Many of the problems surrounding the concept of "encouraging" fall away if we could insert a requirement of culpability, and that brings me to amendment No. 16. As I have said, these are very powerful provisions and there are very important arguments in favour of restricting those caught by them to people who bear a degree of blame for, or at least had an idea of, what was going on.
	In particular, it is critical to remove the risk that I have highlighted—that end-clients could be liable for the tax debts of their contractors—since that risk could have a seriously damaging impact on the flexibility of the UK labour market. The Government seem to think that the use of the term "actively facilitate" imports an element of deliberation or culpability, but that is simply not clear. A person could be actively involved, on a daily basis, with the provision of services but not know much about the corporate structure through which they were provided. As long as someone was actively involved with the provision of services by the company, they could be caught even if they had no knowledge that the company was an MSC or was being used to avoid tax.
	Amendment No. 13 would remedy that situation by ensuring that section 688A catches only those who knew, or could reasonably be expected to know, that the company through which the services in question were being provided was an MSC. In Committee, the Minister was unable to explain why he resisted the amendment despite the fact that the Treasury's own consultation document on the provisions indicates that that is exactly how HMRC believes that section 688A will apply in practice.
	That was confirmed in a letter to me from the Financial Secretary, dated 10 May this year. He stated:
	"Our clear objective is that those who don't know or could not reasonably be expected to know that they are dealing with an MSC should not be within scope of the debt transfer provision".
	How does he reconcile that statement with his statement in Committee, when he rejected a defence based on ignorance? By doing that he in effect accepted that it is possible for unwitting third parties to be caught by the third party debt rules. Nor did he explain in Committee why such provisions are acceptable in other areas of legislation, such as the Insolvency Act 1986, but not in this context, where they could do so much to clarify the legislation and reassure people who are connected with freelancers and contractors.
	As for amendment No. 14, the Financial Secretary has taken steps to remove almost all reference to "HMRC thinks" in the Bill. The amendment would see the back of "HMRC considers", which suffers from the same defects. Either a tax debt is due or it is not. What HMRC considers to be the case should not be relevant. What should count is whether the situation falls within the scope of the legislation. If we were to grant HMRC the power to levy taxes when it considered them to be due, that would give it far too much discretion and would undermine yet again the principle that it is for Parliament, not the Executive, to determine whether citizens should be taxed. If the Minister is prepared to junk "HMRC thinks", why does he continue to inflict "HMRC considers" on the public?
	Amendment No. 17 is designed to prevent local tax inspectors from using section 688A as a shortcut to collect taxes from third parties simply because it is easier than pursuing the taxpayer directly. I have received a number of representations on this point. The Professional Contractors Group is understandably anxious, given the unhappy experience that many of its members have had with HMRC's heavy-handed approach to IR35. It says:
	"PCG feels uncomfortable with the prospect of HMRC being able to 'pick low-hanging fruit' by transferring debts to an easier target if the first transferee seems unlikely to pay."
	Amendment No. 17 would limit HMRC's discretion in this area and essentially require it to adopt the sequence set out in section 688A(2) in pursuing the different parties. Given the powerful nature of the new power to impose a liability to pay other people's tax debts, it would give huge comfort to know that constraints are in place to require HMRC to pursue the real offenders first, before coming after those whose involvement was inferential and unwitting.
	In conclusion, contract working is of key importance to thousands of workers, who value the freedom and flexibility it gives them. I am sure that Treasury Front-Bench Members would agree that it is also critical when competing in a global world economy. The reality is that many hard-working, law-abiding contractors could be hit by the legislation even when they are not dodging taxes or misrepresenting the nature of their relationship with their end clients. It is also clear that the cost of the professional advice that they need could be driven up by the flaws in the legislation and that the uncertainties generated by the Bill could significantly undermine the flexibility of the UK Labour market, about which the Chancellor has frequently boasted.
	Above all, the legislation will provide yet another set of complex tax hurdles for small start-up businesses to try to jump over. We should remember that today's one-man service company could easily become tomorrow's Apple, Amazon or Google. If we smother these enterprises at birth, the only people who will gain will be the entrepreneurs of China and India, who are already anxious to move in on our service industries. I urge the House and the Minister to take this final opportunity to grapple with the flaws in the legislation and to deflect the blow that is about to land on so many small services businesses across the nation.

Rob Marris: I am sure that the whole House will be just as pleased as me that the hon. Member for Chipping Barnet (Mrs. Villiers) has done her homework. She referred to outsourcing and back-office service companies. While there is an issue to address, I should put this in context. The Treasury must take all reasonable steps to ensure that tax and national insurance are paid. Apart from anything else, social justice requires that, as does the provision of public services to the people of this country on which the Government have such a good record. Those services must be paid for, so tax must be collected.
	It is entirely appropriate to clamp down on loopholes because we do not want to support tax dodgers. However, the loopholes must be plugged in a way that does not penalise unduly legitimate and compliant managed service company businesses that attempt to assist entrepreneurs by dealing with their administrative or accountancy needs—those are the back-office functions. Of course, the Treasury must always examine the impact in practice of the legislation that it implements. It must also ensure that people do not get away with dodging taxes, which has undoubtedly been happening in some sectors of the managed service company industry. Schedule 3 is somewhat controversial. Fear has been expressed that the provision might drive people from managed service companies to personal tax companies, which, paradoxically, might decrease the tax take because some people would try to avoid making national insurance payments.
	I have received representations from an established managed service company that rejoices in the name of No Longer Limited. The company offers a tax planning and administration service for contractors on a fixed or percentage fee, regardless of their IR35 status, and the self-employed who can join its limited liability partnership. Every contractor undertakes a full compliance check with the company. If that is successful, NLL pays tax and national insurance on its profits on its behalf into a quarterly self-assessment account and ensures that the due dates of 31 January and 31 July are met timeously. For contractors that are businesses in their own right, the alternative to the back-office functions provided by organisations such as No Longer Limited is to set up their own personal service company. Under the classic model for such a company, contractors pay themselves, as employees, a small salary—perhaps just the minimum wage—while the remainder is paid as a dividend, which avoids national insurance and cuts the tax take. That is not in the spirit of what I would like to see.
	NLL is owned by Mr. Colin Howell. Part of the purpose of his business is to ensure that there is full compliance and that the right tax bills are paid quickly. He tells me that the new law could have the perverse and unintended consequence that such back-office companies would become no longer viable, which would mean that No Longer Limited would become "No Longer There", which would lead to the loss of up to 40 jobs. It is clearly not for me or the House to adjudicate on such claims today, but I wanted to convey Mr. Howell's representations.
	I understand that Mr. Howell will be seeking an exemption, given that that is allowed under proposed new section 61B(3) and (4). If he does that, Her Majesty's Revenue and Customs officials will make a judgment with the full facts in front of them. It would be wholly inappropriate for me to ask my hon. Friend the Financial Secretary for a direction or a decision today—he would not give one; I would not seek one—but I would ask companies such as Mr. Howell's to be given full consideration if and when they claim an exemption to ensure that the law does not result in rough justice. If Mr. Howell's claims are correct, it would be likely, perversely, that the measure would result in a lower tax take and that jobs would be lost as companies moved away from managed service companies. In such circumstances, his firm would have to close down.
	I hope that my hon. Friend the Financial Secretary will reassure us about how back-office companies, in contradistinction to the legal and accountancy companies covered by the exemption under proposed new section 61B(3), would be able to obtain an exemption so that a company such as No Longer Limited would not have to close down because its business had migrated elsewhere. I stress that I do not want a decision on that company's case. I am merely citing it as an example of a company providing back-office services that feels that it might be adversely affected by the Bill, yet unable to obtain an exemption. It would be most helpful if my hon. Friend would give us a rough indication of the exemption procedure.

Colin Breed: It is fairly obvious that, even after extensive debate in Committee and the speeches made tonight, considerable uncertainty remains about the proposals. The aim is to protect legitimate managed service companies, which do a fine job, while seeking out those who use that as a means of avoiding tax and national insurance. Our senses are heightened by the debate in the broad industry that surrounded IR35; we anticipate the same sort of problems arising now.
	It is perhaps impossible to get the drafting exactly right, but the amendments represent a valiant attempt to tackle some of the problems that remain even after the assurances that the Minister gave in Committee. We are also concerned about the guidance, because we know that guidance cannot be relied upon, especially when cases are pursued as far as the courts. Guidance is therefore rather insecure. It is Parliament's job to make legislation as accurate as possible and not provide scope for wide interpretation by HMRC personnel. Interpretation is inevitable, and I believe it will be interpreted differently in different parts of the country, which will create problems. I acknowledge that Ministers have striven to improve the clarity, but much uncertainty remains. A number of professional advisers have spoken or written to us and lobbied us.
	I assure the Minister that the Liberal Democrats understand the principle and support what the Government are trying to do. However, we are concerned that unless the legislation is tightened—perhaps along the lines set out in the amendments—it will prove to be problematic and may endanger some legitimate businesses that will not wish to continue as managed service companies. The legislation may well prove to be difficult to interpret and be applied differently in different parts of the country.
	We support the amendments. I accept that some of them are probing, but the Government must answer them if we are to achieve legislation that is as accurate as we can make it.

Stewart Hosie: I thank the hon. Member for Chipping Barnet (Mrs. Villiers) for going through the amendments in considerable detail. I know that it is late and we have been through this debate in Committee, but it is important because of the potential scale of the impact of the measure.
	I share the concerns voiced by many people, including the hon. Member for Wolverhampton, South-West (Rob Marris), that some companies, particularly legitimate recruitment and accounting services companies, as well as other back-office firms, may be defined as managed service companies when they are not. I shall go through the definition of an MSC, but first I shall talk about the amendments.
	Amendment No. 8 would amend the description of an MSC by tightening the criterion in proposed new section 61B(1)(d) of the Income Tax (Earnings and Pensions) Act 2003, changing the wording from
	"a person who carries on a business of promoting or facilitating"
	to a person
	"whose sole or main business...is the provision or facilitation of"
	MSC services. That is a useful safeguard to avoid the legitimate back office-type of operation being deemed to be an MSC merely by association. It would also offer some comfort to legitimate recruitment firms, which may be deemed to be MSCs by association with genuine MSCs, because they present as a candidate for a legitimate contract job someone who may not even know their own employment status but who may have been used by an MSC—a real one—that was no more than a gangmaster operation.
	Amendment No. 9 would leave out "involved with the company" and tighten the provisions by including the words
	"regularly involved...with all or most aspects of running the company on an ongoing basis".
	That change offers real protection to companies that place people from an MSC who are presented as bona fide contract workers, but who, as I have said, may not even know their own employment status. That is an extremely important protection.
	Amendment No. 11 would leave out "influences or" from proposed new section 61B(2)(b), and would require control to be the criterion that determines whether an MSC provider is involved with the company. Amendment No. 13 would specify in proposed new clause 61B(2)(c) that the company must be required to exert
	"a substantial degree of influence over the provision of...services".
	Amendments Nos. 11 and 13 are necessary to protect third party companies that are not MSCs from being defined as such; that is particularly important for recruitment firms or accounting companies that facilitate contract employment. By that I mean a recruitment firm that offers any other services—even advice on the nature of payment, on how to invoice or on which contract to take—or an accounting services company with a recruitment arm that assists in the final negotiation of a contract once the contract is put forward by a recruitment firm.
	It is easy to see that a third party firm could be defined as an MSC without that protection. The description of an MSC in proposed new section 61B(1)(a), (b), (c) and (d) is clear. Paragraph (a) says:
	"its business consists wholly or mainly of providing (directly or indirectly) the services of an individual to other persons".
	A recruitment firm would come under that, and an accounting services company might do so if it had any input into the negotiation of a contract. Paragraph (b) says:
	"payments are made (directly or indirectly) to the individual...of an amount equal to the greater part or all of the consideration for the provision of the services".
	That concerns payment. Paragraph (c) says that a company is an MSC if the way in which the payments are made would result in the individual receiving more than they would if they were a normally employed member of staff, but that is the reason why many people become self-employed contractors; they take a risk and go it themselves, but there are tax advantages, and the income received may be slightly greater. Paragraph (d) mentions
	"a person who carries on a business of promoting or facilitating the use of companies to provide the services of individuals".
	That is the whole purpose of a recruitment firm. The paragraph would possibly catch an accounting services company with a recruitment arm, too.
	Of course there are some protections, but I do not believe that they are sufficient. That is why I will support the amendments tonight. A protection is offered in proposed new section 61B(4), which says that the only time when a person does not fall within subsection (1)(d)—that is the description of an MSC—is when they only place individuals with persons who wish to obtain their services. As a recruitment firm may well provide assistance with visas for an overseas contract, or specialist training for an offshore contract, or accommodation for a contract in a strange place, they are not only placing individuals; they are doing other things, too, so the protection in new section 61B(4) does not necessarily apply, as subsection (5) allows an opt-out.
	Subsection (5)(a) excludes the protection in subsection (4) if the person or associate does anything in subsection (2)(c)—that is, anything that
	"influences or controls the way in which payments to the individual...are made".
	If a recruitment firm or an accounting services company suggests that the individual contractor invoices weekly, fortnightly, monthly, or three-monthly, according to what suits the contractor, that influences the way in which payments to the individual are made, and therefore the protection in proposed new section 61B(4) does not apply.
	Reference has been made to the safe harbour in subsection (3), which says:
	"A person does not fall within subsection (1)(d) merely by virtue of providing legal or accountancy services in a professional capacity."
	At face value that sounds fine, but if the firm, particularly in an accounting services company context, has a recruitment or personnel arm that offers advice on visas, training or accommodation, or that assists in any way with the final negotiation of a contract, that safe harbour would not apply.
	As the hon. Member for Chipping Barnet said, the Minister gave the Committee certain assurances, and it will be useful to hear what he has to say today. The volume and detail of representations, however, in the real world outside the Chamber are such that he may wish to toughen up what he is going to say or, indeed, tell us that he is prepared to reconsider the Bill's provisions so that we do not have to rely on guidelines and regulations in future.

Mr. Speaker: I call Mrs. Villiers to reply.  [ Interruption. ] I call the Minister to reply.

John Healey: Thank you, Mr. Speaker. I would hate to miss the opportunity to respond to the debate.
	The hon. Member for Dundee, East (Stewart Hosie) is right that we have been through this in some detail more than once. He is right, too, that it is an important matter, as hon. Members have emphasised. The hon. Member for Chipping Barnet (Mrs. Villiers) recognises—and I am glad that she did so so clearly—the need to tackle the avoidance that undoubtedly results from the existence of MSCs. She supports our proposals on two conditions: the provisions should be clearly drafted and appropriately targeted. I hope that I can give her that reassurance tonight, as I have tried to do in previous debates on the Bill. I hope that that reassurance will help the hon. Member for South-East Cornwall (Mr. Breed), too, as well as my hon. Friend the Member for Wolverhampton, South-West (Rob Marris). I am glad of my hon. Friend's support in principle, as well as his recognition, which was shared by the hon. Member for South-East Cornwall, of the difficult need to balance provisions to catch those whom we want to catch against the need not to bring into the net those whom we do not want to catch or indeed, introduce provisions that will have perverse consequence.
	I shall try to deal with concerns about back-office companies that offer administrative services and, in so doing, tackle the question of exemption and whether or not provisions that have been in place for some time have had an effect on employment. I shall then deal specifically with the amendments tabled by the hon. Member for Chipping Barnet so that, without delaying the House unduly, I can deal with hon. Members' concerns. The hon. Lady reiterated, as she has done consistently, understandable concerns about the position of freelancers. Freelancers who outsource any part of their administration are not, and should not be, in danger of being caught by the legislation, which is not intended to, nor does it, catch persons genuinely in business on their own account who receive help to run their company. The legislation catches those who have simply been provided with a company as a means to an end. In achieving that end, they need the company to be run for them.
	The legislation therefore does not prohibit small contractors from outsourcing the administration of their companies. They can obtain the support services that they need, but there is a distinct difference between someone who offers back-office services to client companies generally and someone who is in the business of promoting or facilitating the use of companies to provide the services of individuals who, as part of that business, offer support services. Of course, such people can operate through MSCs if they choose—that is not a problem, and we do not discourage it—but they will have to pay the proper employed levels of tax and national insurance.
	Let me try to make the point slightly differently so as to pick up a set of associated concerns. Simply because someone is not exempt by virtue of proposed new section 61B(3) does not mean that they are caught by the legislation—a point that I have made in previous debates. If that is to happen, someone must fulfil wholly the criterion of proposed new subsection (1)(d), which links directly to proposed new subsection (1)(B), too. They must first be in the business of promoting or facilitating the use of companies to provide individuals' services.
	HMRC will give careful consideration to requests to consider the application and qualification for exemption, but I stress that those providing corporate solutions to persons seeking to disguise employment use a wide variety of structures. Any examination should not provide scope for MSC providers to exempt themselves from the legislation.
	Let me tackle the question whether people are going out of business. It seems that some MSC providers are winding up or changing their businesses because there is no longer a tax and national insurance advantage from operating an MSC scheme. That reinforces the point that such schemes existed only to avoid tax and national insurance, and now that that has been stopped, they have no real reason to continue in business.

Theresa Villiers: I did not have in mind people being laid off by MSC providers. I was concerned about the contractors who have written to me saying that their source of work is drying up, and about people who organise and provide recruitment services for contractors and who are laying people off because there is so much anxiety about the legislation that they are afraid to get involved in providing services to contractors in case they get caught by the third party debt provisions.

John Healey: The hon. Lady caught me in mid-sentence. Perhaps I should not have been so generous or ready to give way. I was going on to say that as she would expect, we have been watching carefully the impact of the legislation in the sectors that it might affect, and we have no evidence that it has had any adverse effects on employment. Our assessment to date is that the new rules have been operated by many providers since April with no apparent disruption to the labour market.
	I turn to the specifics of the amendments. Amendments Nos. 8 and 9, which deal with the definition of an MSC provider, would enable MSC providers determined to sidestep the definition to seek to run a dual business, of which the provider element comprised only 49 per cent. Hon. Members will see immediately that that is an obvious way of restructuring the business to sidestep rules if they were amended as proposed. For the same reason the term "sole" would provide even greater scope for circumvention. Far from tightening the definition, as hon. Members have argued, the amendment would loosen the scope for avoidance—the very problem that we are trying to deal with.
	On the tests for involvement with the MSC, amendments Nos. 11 to 13 seek to change these tests, creating tests which would be easy to circumvent. There is no reason why a person purportedly providing business services to a company through which a worker provides their services should seek to influence the way in which a client company provides the worker's services. I explained that clearly and on the record in Committee.
	The question of influence, as I explained, is clearly distinct from independent tailored advice which is normally given by accountants and other advisers. Importantly—this is the proposition in the amendments—if the test were merely control, it is likely that many providers would take steps to ensure that their arrangements gave the impression that control lay with the company. Influence would be less easy to disguise.
	Amendment No. 13 would remove three of the five tests, and import terms such as "substantial degree of influence" in reference to a standardised product. The weakness with these amendments is that to prescribe involvement in this way would inevitably result in MSC providers claiming that their services did not fall within the detailed strategy description, creating significant risk to the aims of the legislation.
	Amendment No. 14 is presumably an attempt to remove the possibility of an officer of HMRC using his discretion to transfer an amount that in other situations would not be considered due. That is not necessary. An HMRC debt can arise only by virtue of one of the existing provisions in the PAYE legislation.
	On amendments Nos. 15 and 16, we have listened carefully to the concerns expressed about the scope of the debt transfer provisions. We have already made amendments to ensure that there is greater clarity and certainty about who is or is not involved. Amendment No. 15 would substantially undermine the effectiveness of the transfer of debt provision. The removal of the word "encouraged" would enable those third parties to continue to encourage workers into MSCs without themselves facing financial risk. Amendment No. 16 would open the door to abuse by allowing ignorance as a defence. Finally, amendment No. 17 contains detail that would be more appropriate in the guidance.
	In the Public Bill Committee, I indicated that the regulations relating to schedule 3 would be published by HMRC in draft and would be laid before the House once the Finance Bill has received Royal Assent. I also gave the undertaking that HMRC would informally consult interested parties to ensure that the guidance on the legislation provides the clarity that those groups seek. We have held detailed discussions with representatives and experts and are building many of their suggestions into the guidance. We anticipate that the guidance will be published next week, and I think that hon. Members accept that it will be entirely in keeping with the approach that we have taken since the first draft regulations and legislation were published alongside the pre-Budget report.
	We have improved the legislation and taken into account the views expressed at every stage of the process. I hope that I have reflected that tonight and provided the reassurance the hon. Members seek. The amendments are unnecessary or would jeopardise the intent of the clause.

Theresa Villiers: The Financial Secretary has not reassured me. He has not added anything to his remarks in Committee, but the problems are still significant. The fact that the provision has been proposed at all indicates that IR35 has failed. If the legislation is adopted as drafted, I fear that the Government will be back in a year or so asking for further complicated legislation to try to deal with the problem. I therefore seek leave to withdraw the lead amendment, but I ask the House to divide on amendment No. 13.
	 Amendment, by leave, withdrawn.
	 Amendment proposed: No. 13, page 92, line 30, leave out lines 30 to 34 and insert—
	'(c) exerts a substantial degree of influence over the provision of those services by providing a standardised company product to the individual ("the worker") whose services are then provided by the company.
	(2A) For the purposes of subsection (2), arrangements involve a standardised company product if—
	(a) the arrangements have standardised, or substantially standardised, documentation—
	(i) the purpose of which is to enable the implementation, by the worker, of the arrangements; and
	(ii) the form of which is determined by the provider, and is not tailored, to any material extent, to reflect the circumstances of the worker;
	(b) the worker enters into a specific arrangement or series of arrangements; and
	(c) that arrangement or that series of arrangements is standardised, or substantially standardised, in form and is connected with the provision of services by the worker.'.— [Mrs. Villiers.]
	 Question put, That the amendment be made:—
	 The House proceeded to a Division.

Mr. Speaker: Order. I ask the Serjeant at Arms to investigate the delay in the Aye Lobby.

The House having divided: Ayes 201, Noes 279.

Question accordingly negatived.

Deferred Divisions

Motion made, and Question put forthwith, pursuant to Standing Order No. 41A(3)(Deferred Divisions),
	That, at this day's sitting, Standing Order No. 41A (Deferred Divisions) shall not apply to the Motion in the name of John Healey relating to Off-Road Vehicles (Registration) Bill [Money].— [Mr. Watts.]
	 Question agreed to.

Schedule 9
	 — 
	Insurance companies: transfers etc

Edward Balls: I beg to move amendment No. 19, page 148, line 33, at end insert—
	'( ) In section 431 of ICTA, at end insert—
	"(2ZG) The Treasury may by order amend the definition of "insurance business transfer scheme" given by subsection (2) above where it is expedient to do so in consequence of any amendment of section 105 of the Financial Services and Markets Act 2000.
	(2ZH) The power conferred by subsection (2ZG) above includes power to make incidental, supplementary, consequential or transitional provisions and savings (including provision amending any provision of the Corporation Tax Acts relating to insurance companies).".'

Mr. Speaker: With this it will be convenient to discuss Government amendments Nos. 20 to 32.

Edward Balls: Schedule 9 includes a range of measures designed to simplify and clarify the tax law for transfers of life insurance business. We had a long and interesting debate on those matters in Committee. They are complex provisions and the Treasury and the industry have held extensive consultations on them over the past year. Amendments Nos. 19, 20 and 21, on transfers of business, relate to part of that consultation.
	Amendments Nos. 22 to 29 apply to schedule 10. Although the schedule deals with a range of issues in insurance tax law, the amendments concentrate on only one aspect of the schedule—the treatment of structural assets, on which I wrote to the hon. Member for Fareham (Mr. Hoban) on 5 June, following our interesting debate in Committee. Amendments Nos. 30 to 32 are consequential amendments to the repeals schedule. I shall first cover the schedule 9 amendments on transfers of business and then the schedule 10 amendments on structural assets.
	Amendment No. 19 introduces a regulation-making power to enable a quick and flexible response if the regulatory legislation in the Financial Services and Markets Act 2000 changes. It allows regulations to be made amending the tax law definition of insurance business transfer scheme. The definition is important as all the legislation in schedule 9 depends on it. It is wider than the definition that applies in the Financial Services and Markets Act, because the Act allows some types of scheme where policyholder protection issues are not as relevant as in most schemes carried out without court approval. However, tax law allows those excluded schemes to get the benefit of the tax-neutral treatment given by schedule 9.
	The UK has to transpose the European reinsurance directive into UK law before the end of the year. That work is being done by the Treasury, and has been developed in close conjunction with Her Majesty's Revenue and Customs. A consultation document will be issued by the Treasury shortly and will contain draft regulations amending FSMA to take the directive into account. In recent weeks, as the regulations were being prepared at the Treasury, it became apparent that changes would be needed to tax legislation as a result, because the latest draft of the regulations will create a new class of excluded schemes for reinsurance transactions. Under the current tax law definition, such a new class of excluded schemes would not get the benefit of the tax-neutral treatment. That is not sensible, so we are introducing this power to enable the tax law to be changed in line with changes to FSMA. The method we have adopted gives us the ability to make the changes quickly, and in particular to have them in place when the regulations come into force towards the end of the year.

Nicholas Soames: It is clear from the pace at which the hon. Gentleman is dealing with these matters that he is not only uncomfortable but unsure about what he is saying. Given that tomorrow, the architect of the destruction of the British pensions industry becomes Prime Minister, does the hon. Gentleman not think that he, as the agent of the Prime Minister-to-be, should take these provisions away, reconsider them and bring them back to the House?

Edward Balls: I thank the hon. Gentleman for that intervention. I did not know that he was an expert on the European Community reinsurance directive. If he is, and he has views on the regulations that we will produce for consultation in the coming weeks, I look forward to his submission. If he would like to meet to discuss the details, I would be happy to do so. We could meet in the House or in the Treasury. If he would like to cross the Floor of the House, we could meet as colleagues.

Nicholas Soames: The hon. Gentleman clearly does not know a lot, as Opposition Members are aware. We did think that it was all Brown, but now we know that it is all Balls.

Edward Balls: I think that I might move on and get back to the substance rather than "jokes"—I think that that is the word. I enjoyed that one very much.
	In response to representations received from the life insurance industry, amendment No. 20 restores a provision that was unintentionally deleted by the Finance Bill, which we therefore correct. Amendment No. 21 adjusts the regulatory powers in schedule 9 to provide the flexibility needed to deal with future representations from the insurance industry. At present, the regulatory power provided in paragraph 60 of schedule 9 applies only to transfer schemes taking place from the day to be appointed under paragraph 17, which is likely to be in spring next year.
	Not all the provisions in schedule 9 start from that appointed day. One such is proposed new section 444ABD, which starts from the Budget day. Discussions with the life insurance industry on the detail of the transfers of business legislation are continuing, and proposed new section 444ABD and other earlier starting provisions might need amending as a result. I do not know whether the hon. Member for Mid-Sussex (Mr. Soames) has views on that too; if he has, I would be happy to hear them. To give the flexibility to bring in agreed changes from the earliest possible date, Government amendment No. 21 amends the regulatory power. The regulations will be consulted on extensively and will be debated in this House, as they are subject to the affirmative procedure.
	Some concern has been expressed by the industry that bringing forward the date from which regulations can have effect should not be used to impose changes to tax retrospectively. It is not our intention to do that, and in any case a statement of compatibility with the Human Rights Act will have to be made in relation to the regulations.
	Amendments Nos. 22 to 29 amend the part of schedule 10 about structural assets. We had a substantial debate on the issue in Committee, which focused mainly on the complex issues of capital gains and the interaction with the tax law on life assurance companies as it affects structural assets. During that debate, the hon. Member for Fareham asked me some detailed questions, and I sent him an even more detailed written reply, which I hope cleared up his questions. Since that debate, we have consulted in further detail with the insurance industry on the issues that he and others raised, and have reached agreement about what is to be done. The amendments, particularly amendment No. 26, are the result.
	The other amendments to schedule 10 correct minor errors or make technical adjustments to improve definitions and to improve that section of the Bill overall. All the amendments improve the working of schedules 9 and 10, and the insurance industry is fully satisfied with them. On that basis, I commend them to the House.

Mark Hoban: I am grateful to the Minister for spending some time discussing the amendments, although on several occasions he has referred to the debate in Committee on schedule 10 and structural assets. I asked lots of questions in that debate, and did not get many answers. I am therefore grateful for the letter that he sent to me explaining the Government's views on structural assets, and the issues that the life assurance industry raised about the way in which assets held in funds were treated when sold, and what the appropriate capital gains tax treatment would be. It is important to acknowledge that the Treasury and the industry, by working together, have reached a satisfactory solution, and have made progress towards simplifying the tax regime for life assurance companies.
	In the Economic Secretary's letter to my hon. Friend the Member for Chipping Barnet (Mrs. Villiers) on 21 June, he referred to regulations needing to be made for more complex areas. I would be grateful if he could outline when those will be introduced and what discussion there will be with the industry to ensure that consensus is reached on the right way of treating those more complex issues. Will they be decided on a case-by-case basis, or will general rules be introduced to cover all those complicated matters?

Edward Balls: We will continue to consult the industry and will introduce the regulations at the earliest opportunity for consultation. We will ensure that we set out in writing the position case by case so that all the details are available. We will produce them when the consultation is completed. It is important to get the detail right. That is what we have done. We will consult fully to ensure that they are operational as soon as possible, but that will happen only once the consultation has been completed in a satisfactory manner.

Nicholas Soames: I rise only to ask the hon. Gentleman if he will note with care the very powerful strictures to the Chancellor of the Exchequer—the future Prime Minister—from the hon. Member for Grantham and Stamford (Mr. Davies), who was most critical of the pensions policy—

Mr. Speaker: Order. I have a great deal of affection for the hon. Gentleman, but he is going too far. We are discussing a set of amendments that are very tightly drafted. I know that he will have every respect for the Chair and will not proceed in that manner. I ask him not to do so, and I notice that he has been very kind in agreeing to my suggestion.
	 Amendment agreed to.
	 Amendments made: No. 20, page 159, line 34, leave out 'omit "or as a business transfer-out"' and insert
	'for "as a business transfer out" substitute "by being netted off against incomings in lines 11 to 15 of a revenue account"'.
	No. 21, page 161, line 32, leave out from 'made,' to end of line 35.— [Ed Balls.]

Schedule 10
	 — 
	Insurance companies: miscellaneous

Amendments made: No. 22, page 162, leave out lines 39 to 41.
	No. 23, page 163, line 29, at end insert—
	'(7A) In subsection (6) above "the relevant time" means—
	(a) in a case where assets become structural assets held in any of the company's non-profit funds by virtue of the commencement of this section, the end of the last period of account of the company beginning before 1st January 2007, and
	(b) otherwise, the time when the assets become structural assets held in any of the company's non-profit funds.'.
	No. 24, page 163, line 38, leave out 'subsection (6) above' and insert 'this section'.
	No. 25, page 163, leave out lines 43 to 48.
	No. 26, page 164, leave out lines 1 to 5 and insert—
	'(11) Regulations made by the Treasury may make provision for computing for the purposes of the Taxation of Chargeable Gains Act 1992 any gain or loss arising on a disposal by an insurance company of a structural asset held in a non-profit fund in any case where the condition in subsection (11A) is met.
	(11A) The condition in this subsection is met if, in any period of account of the company in which the asset was held by it—
	(a) income arising from the asset was (or, had there been any, would have been) referable to any category of long-term business the profits of which fell for that period of account to be computed in accordance with the provisions applicable to Case I of Schedule D, or
	(b) the company was charged to tax on the profits of its life assurance business under Case I of Schedule D.'.
	No. 27, page 164, line 18, at end insert—
	'( ) Regulations under subsection (3) or (11) above may be made so as to have effect in relation to periods of account current when they are made (as well as periods of account beginning later).".'.
	No. 28, page 170, line 1, leave out 'sub-paragraph' and insert 'sub-paragraphs (4A) and'.
	No. 29, page 170, line 21, leave out '84(2) to (6)' and insert '84(2), (3), (5) and (6)'.— [Ed Balls.]

Schedule 19
	 — 
	Alternatively secured pensions and transfer lump sum death benefit etc

Mark Hoban: I beg to move amendment No. 44, page 226, line 8, leave out from 'least' to end of line 9 and insert
	'equivalent to minimum retirement income (see sub-section 8 below)'.

Mr. Speaker: With this it will be convenient to discuss the following amendments: No. 47, page 226, line 9, at end insert—
	'(1A) The total amount of a spouse's, or civil partner's alternatively secured pension paid to a spouse or civil partner of a member of a registered pension scheme in each alternatively secured pension year in respect of a money purchase arrangement under the pension scheme must be at least equivalent to the Minimum Retirement Income for the alternatively secured pension year (but subject to sub-section 5 below).'.
	No. 45, page 226, line 10, after 'dependants'', insert '(other than spouses' or civil partners')'.
	No. 46, page 226, line 11, after 'dependant', insert
	'(other than the spouse or civil partner of a member)'.
	No. 49, page 226, line 31, after '(1)', insert '(1A)'.
	No. 48, page 227, line 7, at end insert—
	'(8) In relation to minimum retirement income as mentioned in subsection (1) above, the following provisions shall apply—
	(a) the amount of the minimum retirement income in respect of each tax year shall be set by the Treasury by order at the level of the standard minimum guarantee prescribed under section 2 of the State Pension Credit Act 2002 (c.16);
	(b) before making an order under this subsection, the Treasury shall consult such persons as it considers appropriate;
	(c) an order under this subsection (other than the order that applies to the first tax year during which this section is in force) must be made on or before the 31st January of the tax year before the tax year to which the order applies.'.
	Government amendment No. 33

Mark Hoban: The amendments would amend schedule 19, which introduces a minimum draw-down from alternatively secured pensions. Those pensions have been a feature of Finance Bill debates in three of the past four years. It may help hon. Members if they understand some of the background.
	In response to concerns expressed by the Christian Brethren, the Government legislated in 2004 for alternatively secured pensions, which in effect ended compulsory annuitisation at age 75. In 2006, they introduced new rules to determine the tax on the annuitised pot of ASP members on death. However, the Economic Secretary decided that even the new complex rules on inheritance tax and ASPs were not enough to discourage people from buying them and therefore introduced even more draconian rules, increasing the tax rate on death to a maximum of 82 per cent. and introducing a new minimum draw-down from the funds, which is the focus of the amendments.
	The amendments are relatively modest compared with those tabled in previous years. The Pensions Bill was amended in the other place to reflect proposals made by my right hon. and learned Friend the Member for Kensington and Chelsea (Sir Malcolm Rifkind) in his private Member's Bill to set up a retirement income fund as an alternative to compulsory annuitisation. We will have a longer and fuller debate on the issues when the Pensions Bill returns from the Lords shortly, but my amendments are narrowly drafted to reflect one particular aspect: the draw-down.
	Schedule 19 as drafted stipulates that an ASP member must withdraw a minimum of 55 per cent. of the basis amount for the ASP year. That amount is determined on an annual basis by the Government Actuary based on the life expectancy of a 75-year-old. My approach is to substitute 55 per cent. with the minimum amount of income required to ensure that someone does not need to rely on state benefits—a concept that underpins the Bill of my right hon. and learned Friend and the amendments passed in the Lords.
	I accept that setting any minimum level of draw-down is difficult, but by setting the minimum threshold in that way, it would give members of ASPs more freedom over the use of their retirement assets. My concern about the Government's approach is that it compels members to draw down income that could be surplus to their immediate needs if they have income from other sources. Based on the way in which the schedule is drafted, if members do not draw down 55 per cent. of the basis amount, they will be penalised. My measure could be criticised for being as crude as the Government's approach, in that it does not take into account other sources of income, but it would give members of the ASP scheme more flexibility. That would increase the flexibility and attractiveness of ASPs and would make the product much more suited to the needs of pensioners.
	As the debate in the Lords demonstrated, there is a growing consensus on creating more flexibility in pension arrangements. In the debate on that point in the other place, Lord Turner of Ecchinswell, who is the architect of the pensions reforms going through Parliament at the moment, said that
	"there are two arguments, but two arguments only, for compulsory annuitisation. One is that people should not fall back on the means-tested benefits of the state; the other...is that tax relief is given to pension contributions as they go into the scheme, and it is therefore reasonable that as money comes out of the scheme, those are taxed moneys out."
	He also argued that
	"if we took those two principles, we might well end up with a rule establishing a minimum level of annuity that people had to buy, plus an appropriate set of rules as to the tax treatment...I have found it difficult over the years to understand what the arguments against that approach are."
	Lord Turner hits the nail on the head. Increasingly, it is the Government who are out of step with the views of pensioners and the industry, and it is the Government who need to understand more about the pressures that are arising in the pensions debate.
	My amendments do not tackle the exit charge on death, which is also addressed in Lord Turner's comments, but they do tackle the amount to be drawn down from the fund. Increasingly, people will look for alternatives to annuitisation as the growth in defined contributions schemes increases, and my amendments would make an ASP more attractive to those approaching retirement. It is worth reflecting on the pressures in the system. The Office for National Statistics shows that between 1997 and 2005 employee membership of defined benefit pension schemes, such as the scheme that hon. Members benefit from, fell from 46 per cent. to 35 per cent., while membership of defined contribution schemes increased from 10 per cent. to 15 per cent. Those are the people who will end up on retirement with a pot of money to be invested in annuity or some alternative way to provide a retirement income—perhaps something that is more flexible than the arrangements on offer at the moment.
	The switch from defined benefit to defined contribution schemes has been especially evident for smaller employers. That is an indicator of the potential increase in demand for annuities, but as Lord Turner indicated in the same debate:
	"The bigger the imbalance is between demand for and supply of that capacity, the lower the annuity rates will be.
	There is an interest for everyone who buys an annuity in ensuring that those who do not need to buy one do not push their demand into the market and therefore decrease yields."—[ Official Report, House of Lords, 6 June 2007; Vol. 692, c. 1142-1148.]
	If, through amendments such as these we can make alternatives to annuities more attractive, that will benefit those who wish to buy annuities instead of making their own arrangements in retirement. That reflects the growing consensus in the House of Lords debate. Lord Turner supported that principle, as did Baroness Hollis, a former Minister at the Department for Work and Pensions. Lord Howarth of Newport, having seen the damage that the Chancellor had caused to pension funds, also supported the proposals.
	There is a progressive consensus on this issue, but the Government are out of step with it—

George Osborne: Indeed! Once he gets his peerage, the Economic Secretary will agree with us.

Mark Hoban: Compulsion to take out annuities is increasingly regarded as a barrier to saving for retirement, so we need a wider range of options. The amendments would give greater flexibility as to the minimum income to be drawn down from an ASP, thus creating a more attractive alternative to an annuity. There is cross-party support in the Lords for the principle, and it is time for the Government to decide whether they want to be part of the consensus, or to continue in their dogged determination to oppose giving people choice over how they manage their retirement funds.

Edward Balls: I listened carefully to the hon. Member for Fareham (Mr. Hoban), and will try to deal with the points that he made. Ministers faced some distraction from those on the Opposition Front Bench, but we managed to focus on the issue at hand.
	We are very keen to see a progressive consensus being formed in this House, and I encourage pretty much all hon. Members—not all, but almost all—to consider joining us in that cause in due course.

Nicholas Soames: Stamford and Spalding already has!

Edward Balls: Before I turn to alternatively secured pensions, I shall speak briefly about Government amendment No. 33, which makes a minor change to the pension commencement lump sum rules included in schedule 20. One of the technical improvements in schedule 20 will allow more time for the tax-free pension commencement lump sum to be paid, and to allow it to be paid after a member has reached age 75, if the entitlement to that lump sum arose before that age. However, the published Bill omitted a consequential amendment to a regulation-making power in the Finance Act 2004, with unintended and potentially adverse results. Government amendment No. 33 will be welcomed by the industry, because it allows the regulations to continue to operate as originally intended. I am sure that the proposal will be uncontroversial for most hon. Members.
	I turn now to ASPs, the subject of amendments Nos. 44 to 49 and one I spoke about at length in our debate on pension term assurance during the Committee of the whole House. Unfortunately, I was not able to attend the Committee stage, as I had to attend the ECOFIN meeting in Brussels—

George Osborne: Why? Where was the Chancellor?

Edward Balls: I think that he was quite busy at the time, but I cannot remember exactly why. I think that he is quite looking forward to his new job—

Madam Deputy Speaker: Order. The Economic Secretary should respond to the debate.

Edward Balls: Thank you, Madam Deputy Speaker.
	As my right hon. Friend the Chief Secretary to the Treasury made clear in the debate in the whole House, it is important to set out the principle behind the generous tax relief that we provide for pension savings. First, we believe that generous tax relief is provided to support pension saving, where that produces an income in retirement. Pension tax relief is not there to support pre-retirement income, nor to support accumulation or inheritance.
	Secondly, we believe that pensions should get more favourable tax treatment compared to other forms of savings, in recognition of the fact that they are less flexible than other savings and are locked away until retirement. Thirdly, we believe that incentives for employer contributions should be provided and, finally, we consider the pensions tax incentives must be affordable and fall within the current fiscal projections. Given that we are talking at the moment, in 2006-07, about a total of £16 billion of tax incentives to encourage people to save for retirement, as a sensible and proper Government we need to make sure that we use that £16 billion wisely. That is why it is right to take these issues seriously.

Stewart Hosie: How much of that £16 billion goes towards tax incentives for those saving on alternatively secured pensions? I just want to get an idea of the scale of the issue.

Edward Balls: I cannot give the hon. Gentleman a detailed answer. I would say that, in Finance Bill terms, it would count as "neg"—negligible. Without wanting to return to the earlier debates about the philosophical difference between zero and close to zero, my guess is that it would be pretty close to zero.
	The Government believe that the best way for the majority of people to save is to secure an income in retirement by saving through a pension and then purchasing an annuity. An annuity provides an income for life, regardless of how long life turns out to be. As one of our steps towards a progressive consensus, I should point out that the Pensions Commission endorsed that basic principle in its report when it said:
	"since the whole objective of either compelling or encouraging people to save, and of providing tax relief as an incentive is to ensure people make adequate provision, it is reasonable to require that pensions savings is turned into regular pension income at some time".
	On that point, as on many other points, I can agree with the conclusions of the Pensions Commission.

Mark Hoban: Given the consensus that the Economic Secretary mentioned and the way he warmly commended the conclusions of the Pensions Commission, does he also agree with the views of Lord Turner expressed in the debate on pensions in the House of Lords two weeks ago?

Edward Balls: As I said, we are looking to forge a progressive consensus and I look forward to doing so. It should be possible to have a consensus that is progressive if we can involve most Members of the House—although perhaps not all. I quoted the Pensions Commission in that context as an example of one area where we can reach a consensus. On the particular opinions that Lord Turner set out in the House of Lords, I disagree with him and will set out why during the course of my speech.

Nicholas Soames: rose—

Edward Balls: I am sorry to disturb the hon. Gentleman. I see that he has sprung back into life. I am happy to take his intervention.

Nicholas Soames: The hon. Gentleman does not have to apologise at all. He is boring us all sideways as it is. Just for the convenience of the House of Commons, would he have the good manners to define for all of us who sit on this side of the House what exactly a progressive consensus is?

Madam Deputy Speaker: Order. I do not see that in any of the amendments. Perhaps the Minister will continue.

Edward Balls: I will therefore hesitate to attempt to give the hon. Gentleman a definition either of progressive consensus or of good manners.

Philip Dunne: Will the Economic Secretary kindly enlighten us on another matter? When talking about the way in which the Government are approaching the issue, he referred to principles. What is his view of principle 6 from the Financial Services Authority, which is entitled "Treating customers fairly"? What about pensioners who die the day before they reach their 75th birthday? Their pension estate is effectively untaxed. Then there are those who, unfortunately for them, die shortly afterwards. The tax rate that applies varies between 0 and 82 per cent. How is that fair?

Edward Balls: If I can make some progress, I will explain why the approach we are taking to ASPs is right and why it would be quite wrong to go down the route of the amendments. I would point out to the hon. Gentleman that the vast majority of pensioners have bought an annuity well before the age of 75 and would never be able to consider the option of an ASP in any case. It is only those with the largest pension pots who would be able to consider doing so.  [ Interruption. ] From a sedentary position, the hon. Member for Tatton (Mr. Osborne) asked why we introduced ASPs. He knows very well that in the Committee on the Finance Bill in 2004, the then Financial Secretary said:
	"We have made this concession because people hold significant, principled, religious objections to the pooling of mortality risk."—[ Official Report, Standing Committee A, 8 June 2004; c. 485.]
	We thus introduced a way of allowing people with principled religious objections to save in a pension after the age of 75.
	As we have discussed many times in Committee, it is impossible in tax law to distinguish between people with different religious convictions. More importantly, in the year or so after we introduced ASPs, it became increasingly clear that people were using ASP vehicles as a way of substantially avoiding tax. We thus acted in last year's Budget to tighten the laws on inheritance tax to prevent people from using ASPs as a vehicle for passing on tax advantage for inheritance. Even after those changes, such practices continued, so we acted in the pre-Budget report to protect properly the principle that pensioners' tax relief was provided to produce income in retirement, rather than to give a tax advantage to inheritance. That is what we are doing through the ASP changes in the Bill.
	Our application of the principles has been consistent. Furthermore, we have consistently demonstrated that when people are trying to get round the principles by giving a tax advantage to inheritance, we are willing to act decisively, as we did in the pre-Budget report. We have made it clear that an annuity is the best way for the vast majority of individuals to secure an income in retirement. An ASP allows those with religious objections to the pooled mortality risk in annuities to have a guaranteed lifetime income without an annuity and without a tax advantage to inheritance. While the ASP is not a mainstream product—it is blind to religion—the Bill allows a small minority, if they are well advised, to continue to use ASPs to draw an income in retirement without buying an annuity, but only in a way that is consistent with our principle that pension tax relief should not be used to give a tax favour to inheritance.
	The Conservative amendments would replace the proposed minimum income for ASPs of 55 per cent. with an amount that would substantially jeopardise our objectives for ASPs. As I said, the purpose of tax relief is to encourage and support pension saving to produce an income in retirement. The danger of the official Opposition's proposals arises from the specific income from pension savings that they specify must be delivered. Under those proposals, a person with an ASP fund worth £1 million would receive an income that was 10 times lower than that allowed under the Bill. Someone with a large pension pot would have to take a small income and would thus have a large tax advantage pot to pass on to their successors. On the other hand, a person with a much smaller pension fund—£50,000, for example—would draw an income that could well lead the fund to run out much earlier than would be sensible. The proposals would put the most vulnerable in a dangerous and disadvantaged position, while they would give the richest a substantial tax advantage to inheritance.
	Let me cite a tax adviser who responded to our announcement in the pre-Budget report. Mr. Tom McPhail, the head of research at financial advisers Hargreaves Lansdown, told the  Financial Times on 22 March that the changes in the Bill mean that the
	"door has effectively been closed on using pensions for inheritance tax planning purposes".
	The problem with the Opposition amendments is that they would reopen that door and allow some of the £16 billion of tax relief to be used to the advantage of inheritance tax planning. There might be some Conservative Members who would think that that would be a step forward, but I think it would represent a substantial step away from the progressive consensus that Labour Members wish to reach. I hope that the hon. Member for Fareham will not attempt to advantage inheritance tax planning, so I urge him to withdraw the amendment, rather than trying to waste taxpayers' money through breaking our principles and encouraging inheritance tax planning.

Nicholas Soames: On a point of order, Madam Deputy Speaker. You refused to allow the Economic Secretary to define a progressive consensus, but the flim-flam argument that he has recently constructed to oppose the amendment is wholly based on a progressive consensus, and no one on this side of the House has the remotest idea what he is talking about.

Madam Deputy Speaker: That is not a point of order for me. However, following this debate there will be a debate on Third Reading, and perhaps the hon. Gentleman will wish to catch my eye.

Mark Hoban: The reality is that in the Finance Act 2004 the Government let the genii out of the bottle. They introduced changes that led people to think that ASPs were an appropriate form of tax planning and of securing an income in their retirement. The Government legislated for that. Only last year, in the Finance Act 2006, the Government introduced changes to tighten up the rules, and this year they have come back and tried to restrict ASPs to make them less flexible and less attractive to people as a means of providing flexibility in retirement.
	The problem with the Government's approach is that they are out of step with the desire of most people in this country to have greater control over their pension funds. They are out of step with the people of this country who want choice —[ Interruption. ]

Madam Deputy Speaker: Order. The House must come to order.

Mark Hoban: The Government are out of step with people who want to have choice in their lives, who do not want to be patronised or directed by the Government as to how they use their pension funds in retirement. On that basis, I urge my colleagues to vote in favour of amendment No. 44.

Question put, That the amendment be made:—
	 The House divided: Ayes 149, Noes 324.

Question accordingly negatived.

Schedule 20
	 — 
	Pension schemes etc: miscellaneous

Amendment made: No. 33, page 235, line 46, at end insert—
	'(2A) In paragraph 1(6) (power to provide that certain lump sums are to be treated as pension commencement lump sums), for "(1)(c) and (e)" substitute "(1)(a) and (c)".'.— [Mr. Timms.]

Schedule 27
	 — 
	Repeals

Amendments made: No. 30, page 293, line 17, leave out 'the words ", or as a business transfer-out," and'.
	No. 31, page 295, line 44, leave out '84(2) to (6)' and insert '84(2), (3), (5) and (6)'.
	No. 32, page 296, line 14, leave out '17(5)' and insert '17(4A) and (5)'.— [Mr. Timms.]
	 Order for Third Reading read.

Stephen Timms: I beg to move, That the Bill be now read the Third time.
	It is a pleasure to begin by thanking all those who have contributed to the consideration of the Bill in the Committee of the whole House, in the Public Bill Committee and over the past couple of days on Report. We have missed my right hon. Friend the Paymaster General—I believe she has been missed on all sides. This would have been her 13th Finance Bill, and I know that the whole House would want to join in paying a tribute to her.
	The major changes in the corporate and personal tax systems in this year's Budget have been possible because of the unprecedented stability and growth that the Government have delivered over the past decade—record levels of employment, low inflation, and the second highest GDP in the G7 per head, as opposed to the lowest when we came to office. This is the longest expansion among the entire Organisation for Economic Co-operation and Development and the longest on record for any G7 country, so it is no surprise that the International Monetary Fund praised the UK in February for our
	"decade long record of strong and steady macroeconomic performance".
	The Bill continues that progress. It enhances competitiveness, supports investment and innovation, increases fairness, including safeguarding the revenues to deliver world class public services, and addresses the growing challenge of climate change. Clause 2 reduces the main rate of corporation tax from 2008 to 28 per cent., a lower rate than any of our major competitors. Clause 3 phases in necessary increases to the small companies rate, with the proceeds recycled to businesses that invest.
	To support investment, clause 36 extends the enhanced 50 per cent. rate of first year capital allowances for small businesses for another year, and next year a new annual investment allowance will provide 100 per cent. first year allowances for the first £50,000 worth of expenditure on most plant and machinery—a big cash flow benefit to companies that reinvest their profits, so offsetting the small companies rate increase for investing small companies.

Philip Dunne: Will the Chief Secretary give way?

Stephen Timms: I will not give way.
	The Budget targeted fairness as well. Changes— [Interruption.]

Madam Deputy Speaker: Order. The House must come to order.

Stephen Timms: Changes announced this year, which will be legislated for next year, include a big simplification of the income tax system, with just two rates at 20p and 40p, and measures to take 200,000 children out of poverty and to take nearly 600,000 pensioners out of income tax altogether. The Bill also includes measures to safeguard revenues, dealing with schemes such as those that we debated today, which are unfair on the vast majority of taxpayers who pay their fair share.
	The Bill introduces reforms to determine penalties for errors. not only on the basis of the amount of tax understated, but by the type of behaviour that caused the understatement and the extent of taxpayer disclosure.
	The Bill includes measures to protect the environment. This has been a decade of unprecedented macroeconomic stability and uninterrupted growth, but the Stern report made it clear that such success will not be possible in the future unless we make reducing carbon emissions a priority.

Philip Dunne: Will the Chief Secretary give way?

Stephen Timms: No, I will not give way.
	The Bill rises to that challenge with targeted and economically efficient carbon saving measures—for example, to air passenger duty and vehicle excise duty. There are measures to reduce household carbon emissions as well, including incentives for energy efficiency in the current building stock and in new build.  [Interruption.]
	Clause 19 is particularly interesting. It will help to kick-start the market for zero-carbon homes like those planned for Galleons Park, a development going forward in my constituency.
	Finally, on the environment, clause 16 implements—

Madam Deputy Speaker: Order. We cannot have conversations taking place across the Chamber.

Stephen Timms: Clause 16 implements the legislative framework that will enable greater use of auctioning to allocate allowances in phase 2 of the European Union emissions trading scheme, helping to strengthen its long-term integrity and efficiency. The system of charges for tackling climate change across the UK, which this Finance Bill introduces, is now an important part of Government economic policy, with a significant fiscal impact on the UK as a whole.
	Over the past 10 years, the UK has enjoyed more stability in GDP growth and inflation than in any decade since the war. Low inflation, low interest rates, high employment, high growth and rising prosperity are the remarkable achievements of this Chancellor over the past decade. For the future, we must continue to deliver the right policies for Britain, enhancing international competitiveness, encouraging investment and innovation, increasing fairness, safeguarding revenues for world-class public services and taking action on climate change at home to support our leading role abroad. That is what this Bill does, and I commend it to the House.

Theresa Villiers: The Opposition will vote against the Bill tonight, because it is flawed in a number of fundamental respects. In particular, we will vote against it because it implements a Budget that was a tax con and not a tax cut. It provides a significant landmark, in that we will overtake India and have the longest national tax code in the world. Thanks to this Chancellor's tendency to micro-manage, tax law has mushroomed, which has increased costs for business and severely damaged our competitiveness in the globalised world economy.
	We remain opposed to the increase in tax rates for small businesses in clause 3. That increase comes on top of interest rate rises and falling living standards. It is an increase that many hard-pressed small businesses can ill afford. And many small enterprises will be hit with a double whammy, with the loss of industrial buildings and agricultural buildings allowances. That change was made without warning or consultation, and investment decisions taken as long as 24 years ago could be affected by that retroactive legislation.
	The MSC legislation inflicts another blow on many small businesses. In an era when we need to get better and better at high-tech, high-value industries, why does the Chancellor insist on kicking the contractor community yet again, when their work is pivotal in the IT sector?
	We welcome a number of the environmentally related provisions in the Bill, but we fail to see why Ministers cannot answer the basic question of how many zero carbon homes there are in this country. They have given us about four different answers, but still they cannot give us a conclusive one.
	We welcome the clauses on microgeneration, but it is a matter of regret that once again the Government rejected the request that they account to Parliament on the critical issue of microgeneration after we re-tabled the amendments to last year's Finance Bill tabled by the hon. Member for Nottingham, South (Alan Simpson).
	We have severe concerns about the drastic restrictions on sideways relief in schedule 4, which could have a hugely damaging impact on scientific research and the innovation that we need to fight climate change. Those restrictions will catch a huge number of innocent transactions. The Minister has said that he can solve the problems with guidance. For the reasons that we set out throughout the debate, one cannot draft excessively wide legislation and allow HMRC discretion to cut down its scope with guidance.  [ Interruption. ] Frankly, that contravenes the spirit underlying the 1688 Bill of Rights and the fundamental constitutional principle that it is for Parliament to determine taxation and not the Executive.  [ Interruption. ]
	The Bill's provisions on pensions continue to demonstrate the Chancellor's mismanagement of the tax system— [Interruption.]

Madam Deputy Speaker: Order.

Theresa Villiers: Significant restrictions are being introduced on ASPs a matter of months after their introduction on A-day. There is little doubt that such instability is one of the main reasons for the collapse in the savings ratio since the Chancellor entered No. 11 Downing street. Small wonder that confidence in saving has sunk to such lows when the Chancellor not only raids pensions funds for billions of pounds every year but pulls the rug from under the feet of savers when they invest in products that his own legislation has been responsible for creating. It is a further blow to savings that the Government have this evening once again resisted our efforts to scrap the annuity rule, which causes so much anger among people who have made the effort to act responsibly and save for their old age.
	We have sought safeguards in relation to the significant powers of arrest and surveillance that the Bill extends to the combined HMRC organisation. Of course, we support the use of powerful tools in the fight against tax fraud, particularly organised crime and missing trader intra-Community fraud, but it is vital that such powers should not be used as leverage in ordinary day-to-day tax disputes. It would not be acceptable if someone was threatened with arrest if they made a mistake on their tax return. We are pleased that the Government have responded to concerns expressed about the concept of "HMRC thinks", which was almost universally condemned. It would be highly inappropriate to give HMRC the power to penalise taxpayers when it merely thinks that they have done something wrong.
	We continue to support the Government's efforts to crack down on MTIC fraud. We welcome the fact that they have now got their derogation from the European Union, but regret that the heavy price they paid was to give up all resistance on the loss of £7.2 billion of our rebate. In negotiating the derogation, it seems that the Treasury finally gave up the last semblance of resistance and handed over £7.2 billion more of our money to the EU.
	On the last full day of his term as Chancellor, this Finance Bill is typical of the 10 years that we have seen of him—not all bad, by any means, but defective in some very fundamental respects. The Bill creates further complexity and instability in our tax system, just as every one of his other Finance Bills has, to the detriment of our global competitiveness. It fails to provide effective measures to tackle climate change. It penalises small companies with higher taxes and more tax complexity, just as the Chancellor has done so many times in the past. It undermines confidence in pensions. Just as we see the Chancellor's 10 years in office ending with figures showing poverty and inequality increasing in Britain, the Bill does nothing to help those on low incomes, and the Budget actually shifts the burden of tax on to the poor and away from those on middle incomes. Above all, we decline to give the Bill a Third Reading because it implements a Budget that was characterised by the spin and the cynically, nakedly political motivation that has typified the Chancellor's years at No. 11—and will no doubt continue to characterise his years at No. 10.

Julia Goldsworthy: Another year, another Finance Bill. It has been a great shame not to see the Paymaster General here, although I have seen her in action in Westminster Hall and she seems to be very well. Perhaps she will be here next year, even though the current Chancellor will not.
	One of the issues that came up in last year's Finance Bill was the clear lack of consultation on significant changes to the taxation system, particularly in relation to the inheritance tax treatment of trusts. This year, that has raised its head again in some important respects. The Treasury has been ignoring the impact that some of its decisions will have on some very vulnerable groups. For example, this afternoon we discussed steps to abolish the industrial and agricultural buildings allowances. Again, there seems to be no understanding of the impact that these changes will have in rural areas, particularly on tenant farmers. We merely heard a restatement of the fact that the package was cost-neutral overall.
	There is not simply a lack of consultation but a lack of openness and clarity. One need only look at the Chancellor's Budget announcements on personal taxation to see that key vulnerable groups are again being ignored. He announced, to paraphrase, that the basic rate of income tax would be cut by 2p next year to make the system fairer and to reward work, but did not say that that cut would be paid for by abolishing the starting rate that he himself introduced, meaning that many low-paid workers would see their marginal rate of taxation double. At best, people would be no worse off if they claimed tax credits and other benefits, but those not entitled to those benefits, such as pensioners, the under-25s and couples without children, would lose out. That was not made clear. That was why the right hon. Member for Birkenhead (Mr. Field) said that we need to publish the impact of these decisions at the time when they are announced so that we have greater clarity and can hold the Government to account for their decisions. There are probably still people out there who do not know whether they will be better off as a result of the Chancellor's announcements. I still do not understand why Conservative Members showed timidity and failed to support a provision that would provide much greater clarity. It was a good principle, which, instead of being rejected, should have been applied to the impact of the business taxation package in the Bill.
	Throughout our proceedings, there has been a lack of transparency. I wonder whether, in some cases, it was deliberate to hide unpalatable proposals. However, in others, it was probably inadvertent and a result of the complexity of the proposals. Again, the Bill would have benefited significantly from open consultation before going into Committee. That option is available to other programmed Bills, and I hope that Treasury Ministers will take that up with the Leader of the House.
	I hope that the Treasury will pay serious attention to that proposal because it has the support of several bodies and representative groups, including the Low Incomes Tax Reform Group, the Institute of Directors, the British Chambers of Commerce, the Society of Trust and Estate Practitioners, the Association of Taxation Technicians and the Chartered Institute of Taxation. They all believe that there is an opportunity for genuine consultative sessions that would benefit the measure, resulting in more workable proposals. There is an opportunity to raise issues on which there has not been adequate consultation and explain more complex issues, especially given that we have a system whereby third-party relaying of information occurs. Such consultation is not intended to duplicate matters on which widespread pre-legislative scrutiny has already occurred.
	I hope that Treasury Ministers will take the proposal on board and take it up with the Leader of the House. I hope that they will be constructive about the matter, because they have been so about other matters and we have held genuinely useful debates.  [Interruption.] For example, we have received responses to our concerns about the word "think"— [Interruption.]

Madam Deputy Speaker: Order. The House is again becoming restive.

Julia Goldsworthy: There has been significant movement on the powers that HMRC officials can take up when they believe that there may have been abuse by the taxpayer. Treasury Ministers have accepted the spirit of the Conservative amendment on statutory references to Public Bill Committees. I am sure that that is a significant step forward. We have also held some constructive debates today on issues such as inheritance tax—Ministers are open minded about discussing the principles of that.
	Sadly, there has been a refusal to give way on some important principles. I have already mentioned the amendment of the right hon. Member for Birkenhead, but another problem is the Government's failure to acknowledge the difficulty that high fuel costs in rural areas represent, let alone to discuss any action that might be taken to help create a level playing field. Again, Conservative Members are happy to recognise the problem but fail to make any proposals to tackle it.
	Most important, the Bill shows no genuine willingness to strengthen green provisions. The Government broke cross-party consensus on microgeneration to try to provide stronger incentives and accountability on such issues. There is still no clear sense of what constitutes a zero carbon home or when we will experience a non-linear progression to the number of such homes that will be provided. Retrospective increases in air passenger duty will do nothing except strengthen public cynicism about the Chancellor's motives. They are clearly an effort to increase taxation rather than change behaviour.
	If the Treasury and the future Prime Minister, who currently leads the Department, wish to convince the public that they are serious about tackling climate change, dealing with poverty and improving the lot of those on low incomes, they must do much better than the Chancellor's 11th Budget and the Bill that we have considered.
	Some changes were intended purely to grab headlines without due care and attention being paid to their impact on behaviour or the effect of personal tax changes on people on low incomes. The impact of the changes in business taxation on small businesses has also not been taken into account. If the Chancellor wishes us to believe that he is a man of substance, he must do more to convince us than we have seen in this year's Finance Bill. Indeed, he should probably apologise for some of the measures in this year's Budget. For those reasons, we shall not support Third Reading.

Stewart Hosie: The Chief Secretary said that the Budget, the Bill and future legislation would lift people out of poverty. That may happen if the tax credit system works, the child tax credit take-up rate is more than 80 per cent., that of working tax credit is more than 60 per cent. and unclaimed entitlement is rather less than £5 billion. When I cited those figures in the debate yesterday, the Chief Secretary said:
	"I do not know the basis of the figure quoted by the hon. Gentleman".—[ Official Report, 25 June 2007; Vol. 462, c. 119.]
	The take-up rates were published by HMRC in 2007 and the entitlement figures, claimed and unclaimed, were also published by HMRC in 2007. If he did not know then, he certainly knows now.
	More importantly, the cumulative effect of the Finance Bill, the Budget from which it flows, and Finance Bills subsequent to this year's Budget will be a tax take on business, particularly small business, leading to a loss of competitiveness, particularly for small businesses in Scotland. If all the provisions on personal taxation are put in place, it will lead to a tax take, particularly from the poorest and most vulnerable in society, with at least 52 per cent. of the working population in Kirkcaldy and Cowdenbeath being worse off.

Jim Devine: Will the hon. Gentleman give way?

Stewart Hosie: I will not take any interventions. It is very late and, with the greatest respect, the hon. Gentleman has rarely been in the Chamber over the past two days, let alone the past six or seven weeks, while we have been debating these important matters. Indeed, there have been so few Scottish Labour Back Benchers here that I was not sure that they had not all gone on holiday for the duration of the debates.
	The Finance Bill and the Budget will tax businesses more and make Scottish businesses, especially the small ones, less competitive. The conclusion of all the measures on personal taxation will make the poorest and most vulnerable worse off. For those two reasons, if for no others, we will oppose the Bill's Third Reading tonight.

Question put, That the Bill be now read the Third time:—
	 The House divided: Ayes 262, Noes 197.

Question accordingly agreed to.
	 Bill read the Third time, and passed.

Off-Road Vehicles (Registration) Bill  [Money]

Queen's Recommendation having been signified—

Stephen Ladyman: I beg to move,
	That, for the purposes of any Act resulting from the Off-Road Vehicles (Registration) Bill, it is expedient to authorise the payment out of money provided by Parliament of—
	(1) any expenses of the Secretary of State in consequence of the Act, and
	(2) any increase attributable to the Act in the sums payable under any other Act out of money so provided.
	I do so because it was the will of the House, expressed on Second Reading, that the Off-Road Vehicles (Registration) Bill should be discussed in Committee. The Bill, introduced by my hon. Friend the Member for Manchester, Blackley (Graham Stringer), will have expenditure implications for the public purse. Therefore, approval for a money resolution is needed before the Committee can engage in those discussions.
	In giving the Bill a Second Reading the House chose to ignore my serious reservations and advice. Let me make it clear that the Government opposed the Bill on Second Reading, and we oppose it now. We lag behind no one in our determination to tackle antisocial behaviour and the nuisance caused by some mini-moto riders, but this Bill is not the way to do it. It is potentially expensive, and would impact more on legitimate users of off-road bikes than it would on those who are causing a nuisance.

Greg Knight: Will the Minister give way?

Stephen Ladyman: In one moment.
	The Bill is seriously defective in so many ways that the amendments that might deliver a workable set of powers would, in my view, be outside its scope.

Several hon. Members: rose—

Stephen Ladyman: I shall give way only once or twice, because of the late hour.

Bill Wiggin: The Minister says that the Bill would be expensive. Exactly how expensive?

Stephen Ladyman: I shall come to that, but in round terms I suspect that it would cost about £80 million.

Stephen Pound: Will the Minister give way?

Stephen Ladyman: I shall, but for the last time.

Stephen Pound: I shall try not to trespass on my hon. Friend's patience and generosity. I thoroughly concur with his analysis of this unnecessary Bill. Does he agree that there are between 13 and 18 existing laws on the statute book which can address the problem perfectly adequately?

Stephen Ladyman: My hon. Friend is right. Were the money resolution to be passed and were the Bill to reach the statute book, it would take police resources away from enforcing those laws in order to enforce the law in this Bill.

Greg Knight: Will the Minister give way?

Stephen Ladyman: No, I will not give way further.
	Agreeing to the money resolution will mean that the potential consequences of passing the Bill are fully considered in Committee. It is on that basis only that I put the resolution to the House.
	The Bill would require the Secretary of State to register all eligible vehicles with the Driver and Vehicle Licensing Agency. It would also require suppliers of vehicles to register them on behalf of the keepers. It would make it an offence not to register an eligible vehicle, and it would provide the police with the power to seize any such unregistered vehicles. Clearly all those measures have cost implications, although they will depend on a number of factors relating to the mechanisms that would be put in place to facilitate the registration process. To administer the scheme set out in the Bill as it stands could cost £30 million over three years. The cost to the police of enforcing the scheme is estimated at £50 million over the first two years after they begin enforcement depending on how much effort they put into that enforcement, the volume of vehicles involved and the range of machines deemed to be within the Bill's scope.

Philip Dunne: Will the Minister give way?

Stephen Ladyman: No, I shall not give way again.
	We can, however, be certain of two things: first, that the total cost of implementing and enforcing the Bill will be substantial; and, secondly, that the police could achieve similar benefits using the existing law at far lower cost—a fact that several forces around the country have already demonstrated.
	The problems associated with mini-motos are often serious, and the Government share the desire of my hon. Friend the Member for Manchester, Blackley to tackle them. We have already done a great deal and I have even promised a further review of existing legislation to see whether we can do more, but I simply do not believe that the Bill is the way forward. However, if discussing it in Committee will help us to establish its failings and identify more practical actions that meet hon. Members' genuine concerns, then so be it. On that basis and on no other, I commend the resolution to the House.

Owen Paterson: This is a gloriously perverse debate because the Minister is speaking vehemently and passionately against his own motion, and he is right to do so. On Second Reading, I outlined 12 areas of existing legislation which enterprising police forces in places such as Coventry, Kent and Northumberland are putting to good effect to solve the problem of mini-motos. We acknowledge that there is a problem in certain areas.

Stephen Ladyman: The hon. Gentleman did indeed point out all the defects in the Bill, and then he went and voted for it on Second Reading along with the shadow Chancellor. Perhaps he could apologise for that mistake.

Owen Paterson: We agreed that the Bill was not acceptable in the form that it took and said that we would not support it. However, we also said that it could be dramatically improved in Committee. Little did we think that with a Second Reading on 2 March—

Madam Deputy Speaker: Order. I must remind hon. Members that we are debating not the Bill, but the money resolution. The scope for debate is very limited.

Owen Paterson: Thank you, Madam Deputy Speaker. My next words were to be "the money resolution". It is amazing how long the Minister has managed to stall this since 2 March and we should congratulate him on that.
	Here we are, with the money resolution before us and astonishingly significant levels of public expenditure being implied. The Minister, in a written answer last week, gave his estimate of the cost as £80 million, with 230 additional staff at the Department for Transport, and that is without including advertising or additional equipment. The Bill would bring into the registration scheme 3 million additional vehicles and 500,000 new vehicles per annum. That is hugely disproportionate to the problem that we are addressing, when we already have 12 existing pieces of legislation.
	The measures would be a colossal burden on a Government agency that is struggling. Last year, 2,193,000 owners failed to pay vehicle excise duty. That raised the revenue forgone from £129 million the year before to £217 million. We know that 1 million speeding fines were not paid last year, because the owners could not be traced. Pertinent to this Bill is the fact that the number of unlicensed motorcycles leapt 152 per cent., from 275,000 to 694,000. As the money resolution would also authorise the payment of
	"any increase attributable to the Act in the sums payable under any other Act",
	there are clear and major implications for expenditure above the £80 million that the Minister has already mentioned.
	In a written answer last week, the Minister told my hon. Friend the Member for South-West Bedfordshire (Andrew Selous) that 2.5 per cent. of the vehicles on the DVLA database cannot be traced. Out of 33 million vehicles, that is 825,000. We have a major problem with uninsured vehicles—there are 1.1 million on our roads. In another written answer last week, the Minister said that no formal assessment has yet been made of the impact of delayed and postponed programmes in the agencies within his remit, but he did say that the Bill would be likely to have an adverse impact on other DVLA IT programmes and hence on the quality of service to the public. Alarmingly, he said that it is likely that one of the projects that would be rescheduled would be the delivery of continuous insurance enforcement. The cost today of enforcement for uninsured drivers is £30 per legitimate policy, so the Bill would entail a huge new hidden cost under paragraph (2) of the money resolution.
	The Minister has received representations from rural interests, farming organisations, motorcycle racing and motorcycle sports organisations, all expressing reservations about the Bill and all concerned about the extra costs implied by the money resolution. He has not had any discussions with the Secretary of State for Northern Ireland, the Secretary of State for Scotland or the First Ministers in Scotland and Northern Ireland. One assumes that there are significant cost implications in those areas.
	All that cost and huge effort could be for a craze that may be on the way out. The Motor Cycle Industry Association says that in 2005, 144,905 units of motorcycles with engines of less than 50cc were imported from China. In February this year, we imported 672 units. On an annual basis, that is a drop of 94 per cent.
	The Bill is going nowhere—

Madam Deputy Speaker: Order. I remind the hon. Gentleman that we are not debating the Bill at the moment, only the money resolution.

Owen Paterson: The money resolution has huge cost implications. There is only one more Friday to debate the Bill and I cannot recommend to my colleagues, who have stayed to listen to this debate, that they should vote for the hugely disproportionate amount of public expenditure on a measure that will not work when we already have 12 effective existing pieces of legislation.

Greg Knight: We all know that a money resolution can only be moved by a Minister. I was rather expecting to see this motion moved by the hon. Member for Grantham and Stamford (Mr. Davies), but he has not yet appeared on the Treasury Bench. No doubt he will do so shortly.
	The Minister made a curious speech. He appeared to endorse the sentiment expressed in a similar debate by the hon. Member for Liverpool, West Derby (Mr. Wareing) who said that
	"if, in its wisdom...the House gives the Bill a Second Reading, the Government would have an obligation to provide the necessary financial memorandum."—[ Official Report, 10 February 1995; Vol. 254, c. 579.]
	Why is the Minister doing this? I hope that he will reflect on the procedure, if not for this motion then for the future. My concern is that the current practice, under which the Minister can move the money resolution for a Bill in which he has no confidence, misleads the public into thinking that prospective legislation might get through, even though we all know that the Government intend to scupper it.
	The Minister should not assume that he has to move this motion just because that is what has happened in the past, and especially not if the Government are going to kill the Bill. Why should the Government take up more private Members' time on a measure that they intend to poleaxe at the eleventh hour?
	That practice should be abandoned. The Government should not move a money resolution unless a clear case has been made by the sponsoring Member as to why they should. In this case, the Bill is sponsored by the hon. Member for Manchester, Blackley (Graham Stringer), and I hope that he will tell us why he feels that his Bill should have a money resolution. Will he say where he thinks that the money will come from to fund what is a very expensive and cumbersome register?

Robert Key: The Manchester casino.

Greg Knight: The Minister went through the process of moving the motion, but made it clear that the Government do not want the Bill. What is he advising Labour Members to do this evening? Is he asking them to follow his procedure in moving the motion, or the opposing sentiments in his speech? Are those on the payroll vote whipped to vote this evening? If so, which way will they vote?
	This money resolution should not be passed unless the Minister says that the Bill is acceptable to the Government. Even if it is acceptable, Opposition Members have every right to divide the House if we are not satisfied about where the money is to come from.
	The hon. Member for Manchester, Blackley has done well to get his Bill this far, but he should not have this money resolution unless he can convince us that it is necessary, and that he has identified where the money would come from. What taxes would he increase to pay for his proposals? We have heard this week that council tax has gone up 100 per cent. under this Government: is he suggesting a further increase in council tax, or that some existing expenditure should be cut? If he were to suggest that spending on flood defences should be cut back, he would be lynched in East Yorkshire.

Madam Deputy Speaker: Order. The right hon. Gentleman is an experienced Member of the House, and well aware of the debate's limitations.

Greg Knight: Thank you for reminding me, Madam Deputy Speaker.
	The Bill's proposals are unworkable and costly, with horrendous manpower implications. It should not be funded out of public money. I hope that the House will follow the words that the Minister used in his speech, rather than his actions in moving the motion, and that it votes to reject the money resolution.

Graham Stringer: I was not intending to speak in this debate, but the right hon. Member for East Yorkshire (Mr. Knight) has provoked me. He focused on where the money for the proposals in the Bill would come from, and the simple answer—as I suspect that every hon. Member knows—is probably from the Consolidated Fund. I shall not be as provocative as the right hon. Gentleman, but I am sure that hon. Members could think of many areas where cuts could be made. But that would be assuming that I agreed with the figures that were given by my hon. Friend the Minister.
	I will not go through the principled arguments that were won on Second Reading—that is the real reason why the matter should be given the opportunity to be debated in Committee—but we had a full four-and-a-half-hour debate and a huge majority were in favour of the measure. Despite the fact that my hon. Friend the Minister made a lengthy speech opposing it, he was unable to convince the hon. Members present.

Greg Knight: Does the hon. Gentleman agree that, although there was a comprehensive debate on Second Reading that covered all aspects of the issue in terms of the nuisance caused to communities, there was very little debate about the financial implications? That is why we should debate them now.

Graham Stringer: With due respect to the right hon. Gentleman, I thought that that was what we were doing. Madam Deputy Speaker has reminded him and others that that is what we are doing. That is precisely the point that I was getting to. I do not have confidence in the figure of £80 million, which was given by my hon. Friend the Minister. The Bill is about extending a current registration scheme to off-road bikes.

Stephen Pound: I am convinced that my hon. Friend entered the process with the best will in the world. I have no doubt as to his good intentions. He kindly spoke to the all-party motorcycling group, which is so ably led by the hon. Member for Leominster (Bill Wiggin). After that meeting, is my hon. Friend still convinced in his heart that the best possible value for money would be achieved by the Bill proceeding in this form with this money resolution tonight?

Graham Stringer: I will come back to my hon. Friend's point later in this completely unprepared speech.
	The Bill is about extending a current registration scheme, on a computer system that already exists. It is unlikely, even given the inflated figures from the Department for Transport and the Driver and Vehicle Licensing Agency, that one could get a scheme that cost £80 million. I suspect that if that went before the Public Accounts Committee or the Transport Committee, those costs would be very quickly reduced.
	To answer my hon. Friend's point about whether I ever thought that this was a perfect Bill, there are many ways in which the Bill could be improved. Exemptions could be made— [ Interruption. ] Exemptions could be made that would reduce the costs, Madam Deputy Speaker. I do not like anticipating what you are going to say, but I suspect that you were going to bring me back to costs, which is precisely where I was going to come back to. In Committee, there would be many ways in which the costs of the Bill could be reduced.

Jim Devine: rose—

Graham Stringer: I will give way to my hon. Friend.

Jim Devine: I am very grateful to my hon. Friend for giving way.

Stephen Pound: In your own time, Jim.

Jim Devine: Thanks.
	Does my hon. Friend the Member for Manchester, Blackley (Graham Stringer) appreciate that £80 million equates to 20,000 hip replacement operations in a year?

Graham Stringer: I have to admit that I did not have that precise costing in mind, either on Second Reading or when I started this speech, but it is an interesting point. That is why the opportunity should be given, in Committee, to reduce the costs. Every single right hon. and hon. Member will have received many representations from the motorbike lobby, many of them making wild accusations about the costs of the Bill. Many exemptions would be made. For example, it has been said that every speedway bike would have to be registered and licensed, but it would be possible to exempt such bikes. Following detailed discussion, it would be possible to make many exemptions that would reduce the cost of the Bill.

Stephen Pound: T.E. Lawrence, who was known as Aircraftman Shaw, died while riding a Brough Superior motorcycle. That very Brough Superior, which is in the London motorcycle museum in Greenford, is threatened by the Bill. Does my hon. Friend consider that threatening that glorious piece of British motorcycling machinery, albeit one with a tragic history, is a good use of public money?

Graham Stringer: I am grateful to my hon. Friend for making that intervention because it gives me the opportunity to say that the registration of bikes in museums would be precisely one of the areas of expenditure that it would be possible to cut. Again, such a claim is one of the pieces of mischief that is being put about.

Hugh Bayley: My hon. Friend generously admits to the House that £80 million would be too high a price to pay for his Bill. What would be a reasonable price at which the Committee might aim?

Graham Stringer: I suspect that if my hon. Friend talks to many of the communities that have been affected by antisocial behaviour and the families who have lost young children because of the problem, they will say that no price would be too high to pay. If he, as I have done, talked—

Mr. Deputy Speaker: Order. The hon. Gentleman must address the Chair.

Graham Stringer: I am grateful for your advice, Mr. Deputy Speaker.
	The House cannot always take the view that no price is too high because it must consider every cost in detail. As I said, through detailed discussion in Committee, it would be possible to make many exemptions and thus reduce the cost of the Bill.

Jim Devine: Does my hon. Friend realise that £80 million could employ 3,200 nurses?

Graham Stringer: I am extraordinarily impressed by the number of factors that my hon. Friend can cite that equal £80 million. He is an inventive and creative man.
	On the basis that the Bill requires further discussion in Committee, I ask the House to agree to the money resolution.

Stephen Ladyman: With the leave of the House, Mr. Deputy Speaker. The House expressed its will on Second Reading: it wanted the Bill to be discussed in Committee. I made the Government's opposition to the Bill very plain then, and I make it very plain now: the Government do not want the Bill to get on to the statute book. We do not even believe that it could be amended in a way that would make it acceptable.
	The simple fact is that only a Government Minister can move a money resolution, and a substantive discussion in Committee cannot take place without that resolution being passed. We have reflected the will of the House by moving the money resolution tonight. In my view, Opposition Members—who have had their fun—ought to allow the Bill to go into Committee, where the will of the House can be done and the Bill can be discussed in detail. In Committee, I hope, we will be able to expose it for the failed piece of attempted legislation that it is and ensure that it does not reach the statute book. However, the money resolution should be passed tonight.

Question put:—
	 The House divided: Ayes 197, Noes 165.

Question accordingly agreed to.
	 Resolved,
	That, for the purposes of any Act resulting from the Off-Road Vehicles (Registration) Bill, it is expedient to authorise the payment out of money provided by Parliament of—
	(1) any expenses of the Secretary of State in consequence of the Act, and
	(2) any increase attributable to the Act in the sums payable under any other Act out of money so provided.

DELEGATED LEGISLATION

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Delegated Legislation Committees),

Terms and Conditions of Employment

That the draft Working Time (Amendment) Regulations 2007, which were laid before this House on 13th June, be approved.  —[Mr. Watts.]
	 Question agreed to.

REGULATORY REFORM

Motion made, and Question put forthwith, pursuant to Standing Order No. 18(1)(Consideration of draft regulatory reform orders),
	That the draft Regulatory Reform (Collaboration etc. between Ombudsmen) Order 2007, which was laid before this House on 9th May, be approved. —[Mr. Watts.]
	 Question agreed to.

EUROPEAN UNION DOCUMENTS

Motion made, and Question put forthwith, pursuant to Standing Order No. 119(9) (European Standing Committees),

Water Policy: Environmental Quality Standards

That this House takes note of European Union Documents No. 11816/06 and Addendum 1, Draft Directive on environmental quality standards in the field of water policy and amending Directive 2000/60/EC, and 11847/06, Commission Communication on integrated prevention and control of chemical pollution of surface waters in the European Union; and supports the Government's aim of securing a proportionate, cost-effective and environmentally protective measure. —[Mr. Watts.]
	 Question agreed to.

PENSIONERS (AGE ADDITION)

Motion made, and Question proposed, That this House do now adjourn. —[Mr. Watts.]

Jeff Ennis: I am grateful for the opportunity to raise an extremely important issue, even in the wee small hours. The Minister for Pensions Reform will know that I recently tabled early-day motion 1463 on the 25p age addition for pensioners over 80, which reads:
	"That this House believes that the 25 pence age addition for pensioners over 80 years old which was introduced at this level in 1971 should now be significantly raised; and further believes that, alternatively, the Government should give consideration to increasing the over 80 year olds' winter fuel allowance by £25 per annum or more as compensation for abolishing the 25 pence age addition."
	I am pleased that the early-day motion has attracted 64 signatures from Members on both sides of the House. The Minister will also know that I recently raised the matter with my right hon. Friend the Prime Minister at Prime Minister's questions.
	I must admit that I have been concerned for some time about the fact that the 25p age addition has remained static since 1971, but matters were brought to a head on 4 April this year, when I attended the 80th birthday party of my father, Bill Ennis, in his back garden. It was a sunny day, unlike the weather that we have recently had in south Yorkshire. Without my prompting, my dad said to me: "Jeff, do you know what the Government have given me for my 80th birthday?" I knew the answer, but I thought I would go along with him and said, "No, what have they given you, Dad?" He said, "25p a week on my state pension. Isn't that ridiculous?" That epitomises the reason why I called for this Adjournment debate. If that is my dad's reaction to the 25p increase on his state pension, I am sure that most other 80-year-old pensioners will have a similar reaction.
	When the 25p addition was introduced, it meant something. In those days, it was officially known as a crown, but we mostly called it five shillings and it was commonly known as five bob—that is the phraseology I recall. I am sure that the Minister's recollections of 1971 are hazy compared with mine, because that was the year in which I started college in Bristol. I remember that at the student bar in Bristol in 1971, I could buy a pint of lager for 15p. Being a Yorkshireman, I remember that it was 15p, because I could buy a pint of lager in Brierley in my constituency for 12p, so there was a 3p differential, which was quite a substantial amount of money at the time. In 1971, for 25p, I could buy a pound of Cheddar cheese, but I would now have to pay £2.60. I could buy a dozen large eggs for 25p, but they now cost over £2. I could buy a pound of bacon for 24p, but it now costs over £3. I could buy four white loaves for 23p. That would now cost £3.44. Taking into account inflation, 25p in 1971 is worth £2.50 at today's prices. There is quite a difference in the value of 25p in 1971 and in 2007.
	I shall briefly examine the history of the 25p age addition and why it has never been increased. It was introduced in September 1971 through the national insurance Bill 1971 by the Tory Government of the day. Sir Keith Joseph explained that it was intended to recognise
	"albeit in a small way . . . the special claims of very elderly people who on the whole need help rather more than others . . . As they grow old their possessions wear out and they need help for necessary jobs which they used to do themselves".
	Sir Keith Joseph explained that as a result of the introduction of the age addition, a single person over 80 on the standard rate pension would get £6.25 a week.
	In 1978 the Labour Government floated the idea of raising the age addition in their discussion document "A Happier Old Age", which stated:
	"The older generation of pensioners, most of whom are women, tend to be poorer and their savings have been eroded by inflation and time. For the over 80s an age addition to pensions of 25p a week was introduced in 1971. For many years ahead the very old will in general be unlikely to have substantial earnings-related pensions. In so far as resources permit, is there a case for a higher pension rate at a fixed age without regard to individual need, or would it be preferable to provide more services for the very old?"
	That sounds rather familiar.
	In 1995 Lord Mackay of Ardbrecknish, a Conservative Minister in the Department of Social Security, said:
	"My Lords, we have no plans to up-rate the 25 pence age addition which is paid to all pensioners from the age of 80. We believe that help should be targeted at pensioners on low incomes, and we have concentrated resources on the higher pensioner premium in income support for those aged 80 or over."—[ Official Report, House of Lords, 27 April 1995; Vol. 563, c. 1021.]
	In 2003, the present Minister for Trade, my right hon. Friend the Member for Makerfield (Mr. McCartney), who was the Minister for Pensions at the time, said:
	"The 25 pence age addition for state pensioners aged 80 and over was introduced by the Conservative Government in 1971.
	The age addition will be maintained, but on its own it is not the most cost-effective way to help elderly pensioners. We have gone much further.
	We have introduced measures which, from October 2003, will mean that the poorest third of pensioner households will have gained over £1,500 a year in real terms.
	We have introduced free TV licences from age 75 worth over £100 a year, winter fuel payments of £200 per year for eligible households paid to some 11 million people in 8 million households, and the minimum income guarantee which means that no single pensioner has to live on less than £102.10 and no couple on less than £155.80 from April.
	We are going further still with the introduction of pension credit from October 2003.
	We have therefore found better and more effective ways to help pensioners with the lowest incomes."—[ Official Report, 25 March 2003; Vol. 402, c. 167W.]
	There is no doubt that the Labour Government have done more than any previous Government to improve pensioner incomes. I am proud to be associated with what the Government have achieved. The Minister might think that I am having a bit of a whinge, but many OAPs resent the fact that the issue leaves a nasty taste in their mouths. We need to consider how best to deal with that. I understand the Government's reluctance to consider raising the 25p age addition in its present form because of all the other initiatives that we have brought in. My view, as I suggest in the early-day motion, is that we should scrap the 25p age addition and, by way of compensation, raise the winter fuel allowance for the over-80s by a minimum of £25 a year.That policy change would find favour with pensioners, who undoubtedly like the winter fuel allowance.
	The current winter fuel allowance standard rate of £200 for a household containing at least one person aged 60 or over was first paid in the winter of 2000-01. Households including a person aged 80 or over have received an additional £100 since the winter of 2003-04. Announcing the introduction of that higher rate for people aged 80 and over, the Chancellor said:
	"At the age of 80, pensioners receive an addition of just 25p a week to cover the costs that getting older involves. At just 25p extra per week, it has rightly been criticised as inadequate, and I have had many representations from MPs on all sides of the House. To double or quadruple such a small allowance would not be a sufficient recognition of the needs of the very elderly over 80, or of the contribution that they have made to the life of our country and its success. The winter fuel payment of £200 has not, I regret, been supported by all parties in this House. But I hope that there will now be all-party support for my proposal that for every household where a pensioner reaches the age of 80, or is over 80, we will add to the winter allowance of £200 an extra payment of £100—a total of £300 that will be paid each and every year to almost 2 million elderly men and women over 80."—[ Official Report, 9 April 2003; Vol. 403, c. 287.]
	In the 2005 pre-Budget report, the Chancellor announced that winter fuel payments would continue to be paid at those rates for the duration of the current Parliament. Around 2 million households benefited from the 80-plus payment in the winter of 2003-2004 at a total cost of more than £208 million. The reply to a question that I recently tabled showed that the estimated annual cost of raising the winter fuel payment by £25 for people aged 80 or over in 2007-08 was around £50 million. For the winter of 2007-08, the total expenditure on winter fuel payments is forecast to be £2,059 million. That switch would be very popular, because it would automatically benefit every pensioner aged over 80.
	The 25p weekly age addition is subject to income tax. Some 830,000 older pensioners currently pay income tax, which is roughly one third of older pensioners—we currently have just more than 2.5 million pensioners aged over 80. After their income tax has been deducted, 830,000 older pensioners only get 20p a week allowance after tax. By switching to an annual increase of 25p or more on the winter fuel allowance, every older pensioner would get the full £25. A two-pensioner household containing two pensioners aged over 80 currently gets 50p a week—25p each—and £25 a year roughly equates to 50p a week for a double household.
	As I have mentioned, the cost to the Exchequer of increasing the winter fuel allowance by £25 has been estimated at £50 million. In my opinion, that would be £50 million well spent. That sum would, of course, be reduced by the current cost of paying out the 25p age addition. Perhaps the Minister will inform the House of that cost, because I have not found that information—the total cost would be £50 million minus that particular sum of money.
	I repeat that I hope that the Minister does not think that I am having a go at the Government. I am proud of what we have achieved so far for pensioners. The announcement earlier this year about once again tying pension increases into average earnings from 2012 is yet further evidence of this Government's commitment to the nation's pensioners. However, my philosophy on this matter is this: why spoil the barrel for a hap'orth of tar? That is exactly how pensioners regard the 25p age addition. After all, these days 25p cannot even buy a second class stamp. I should like the Minister and his Department, and indeed the Treasury, to give very serious consideration to this important matter.

James Purnell: It is a pleasure to be here to respond to this important debate. I should like to start by congratulating my hon. Friend the Member for Barnsley, East and Mexborough (Jeff Ennis) not only on securing the debate but on the case that he has made and the eloquent way in which he did it. I know that he has already managed to convince the Government on two of his campaigns to date, and he was assuring me earlier today that my likely resistance to his proposal would probably be a pyrrhic victory. I look forward to seeing whether he is proved right about that.
	I recognise the point that my hon. Friend makes, not least because I receive a number of letters from people who have just turned 80 and who make exactly the same point—and, indeed, who thank me for having paid for some of the cost of the stamp that enabled them to send me the letter in the first place. The Government will certainly continue to look at the arguments that my hon. Friend makes but, as he anticipated, we will not support his proposal.
	I also congratulate my hon. Friend on the fact that he will be the last Member of this House to obtain an Adjournment debate, certainly in this Chamber, under the current Prime Minister. It is an historic moment and it is worth reflecting on the fact that 10 years on, as he said, pensioners are significantly better off as a consequence of the changes that have been brought in by this Government. That is why we continue to believe that the best way to address the genuine needs of older people is through policies other than increasing the age addition, although I recognise that that is not my hon. Friend's central proposal.
	When the age addition was introduced, 25p was more money in people's pockets than it is now. Then, it was about 4 per cent. of the basic state pension, whereas now it is less than 0.3 per cent. In 1971, only a small minority of people reached the age of 80, whereas now there are nearly 3 million people over 80. However, the problem with increasing the age addition is that it would not be a well targeted measure. As, in effect, an increase in the basic state pension, it would be taxed for people who pay tax and means-tested away for those who are on pension credit—and those who are on the guaranteed credit only would gain nothing at all from the increase.
	That is why the Government, in trying to recognise the needs of older people, have focused on other ways of achieving the same goal. About 3.5 million households with someone aged 75 now benefit from the free television licence—that is worth £135.50 a year and in 2007-08 costs about £500 million. It is already making a big difference. Pension credit makes a particularly significant difference to older people; indeed, more than a third of those entitled to pension credit are over the age of 80. Pension credit has particularly benefited older women, especially widowed women, who have seen a significant difference in the amount that they receive from it.
	Most notably, as my hon. Friend said, we have not only introduced the winter fuel payment but increased it to £200 for pensioners under the age of 80 and to £300 for pensioners over the age of 80. I recently replied to a parliamentary question, which asked how much was being spent on the extra fuel costs of pensioners in 1996, and the answer was £60 million. As my hon. Friend eloquently said, the figure for the winter fuel allowance is now more than £2 billion. That is another example of difference.
	Overall, pensioners over the age of 75 are much better off through the measures that I have outlined than if we had increased the age addition allowance in line with inflation—and, indeed, better off even than if we had backdated it. As my hon. Friend said, it would be approximately £2.50 if it was backdated in line with prices to 1971. The consequence of our reforms is that pensioner households with at least one pensioner over 75 are better off by £34 a week. That dwarfs the figure of £2.44.
	My hon. Friend asked what the cost of the current 25p age addition allowance is. The answer is £35 million in this year's money. I hope that that is helpful, though he will doubtless argue that that makes his case stronger rather than weaker. However, in the spirit of openness at this late hour, I thought that I would give him that figure. The changes that we have made mean that households with pensioners who are over 75 are £34 a week better off. That is significantly more than would be gained even by backdating the age addition allowance to 1971. I understand my hon. Friend's point but, if one has any contact with the social security system, one realises that there are strange byways in it, and we are considering one of them.
	We are united on the point that the Government have done much to help pensioners in the category that we are discussing.

Jeff Ennis: My hon. Friend has been kind to me at this late hour and I am pleased about that. He obviously realises that my main point is not about increasing the age addition allowance but switching it so that the income tax element falls away. I know that I am meeting some resistance. I met the same the resistance from Ministers about raising the age for smoking from 16 to 18, but it crumbled after two years of trying. Will my hon. Friend facilitate a meeting involving him, me and a Treasury Minister to discuss the matter further?

James Purnell: I shall endeavour to do that. My hon. Friend has uttered chilling words, which will stand in  Hansard as a warning to anyone who dares oppose him. With that, I shall take my leave of the House.
	 Question put and agreed to.
	 Adjourned accordingly at twenty-three minutes to One o'clock.